IATA sees tough road ahead, August volume drops 2.7%

IATA sees tough road ahead, August volume drops 2.7% The International Air Transport Association said air freight volume dropped 2.7 percent in August compared with the same month in 2007, part of a widespread slowdown in international trade.
   “Air freight volumes started falling in the second quarter, well before passenger markets, and that decline continued in August with a 2.7 percent fall in the volume of air freight compared with the same month last year,” said IATA’s chief economist Brian Pierce in an e-mail update Tuesday.
   “Unlike passenger markets there was a consistent deterioration in air freight across major regions, suggesting that world trade is weakening significantly as economic growth slows. Leading indicators, such as the further falls in the confidence of manufacturers in major economies, have been predicting a further deterioration in air freight.”
   August’s 2.7 percent decline followed a 1.9 percent drop in July.
   “Unlike passenger markets, the weakness in freight was more broadly spread — which indicates that there is a significant slowdown occurring in international trade,” the update said. “Freight carried by Asia Pacific airlines shrank considerably for the second month running, by 6.8 percent. But there was also weakness in Europe, with a fall of 0.9 percent, and a sharp slowdown for North American airlines with growth of just 0.8 percent. There is a big contrast in Latin American between relatively strong passenger business and sharp declines in freight. This appears to largely reflect restructuring in Brazil with cuts in capacity. Growth fell back again in Africa, after July's recovery, and there was also a slowdown in the Middle East, which remains the strongest growing region for air freight — reflecting the economic benefits to much of the region from high oil prices and the expansion of capacity.”
   IATA said continued capacity expansion has hit load factors as well as profitability the last two quarters.
   “The impact of falling load factors is to reduce profitability,” IATA said. “Jet fuel prices had fallen from $180/barrel highs in July to average $141/barrel in August, but that was still 60 percent higher than a year earlier adding considerably to costs. Weakness in Asian travel markets may be subject to some special factors, but the evidence from overall air travel suggests that the problem for airline profitability is increasingly the weakness of traffic and revenues.”