May better but cargo yields, revenue still suffer
The International Air Transport Association said Thursday that May air freight volume was up slightly from April, and that the decline in volume in May compared to a year ago was less pronounced than in April.
Volume, in terms of air freight ton kilometers, was 17.4 percent lower in May than in the same month in 2008, compared to a decline of 21.7 percent in April.
'Freight volumes had been moving sideways from month to month since hitting their low point in December,' IATA said in its monthly traffic analysis update. 'May marked the first month of noticeable improvement, as manufacturers increased shipments, beginning to add to inventories in anticipation of economic recovery. In May freight volumes rose by around 3 percent above the April level as manufacturers begin to add a little to their inventories in anticipation of an economic recovery.
'This up-tick in air freight is one of the first physical signs of the economic recovery that is being anticipated in equity markets and surveys of business and consumer confidence. Air freight has been shown to be a very timely indicator of world trade and the inventory up-cycle that normally precedes a recovery in consumer and business spending.'
However, the air cargo industry has been hurt by excess capacity, which is denting load factors and yield.
'Capacity cuts are still lagging behind the slump in demand for both travel and freight, with May reductions of 5 percent in passenger capacity and 9.7 percent in freight capacity,' IATA said. 'Freight load factor was down 3.6 percent. Growing excess capacity is intensifying competition and yields are falling at an accelerating rate.'
Despite the marginal recovery in volume in May, IATA said demand has yet to reach a point where airlines can truly count on a turnaround.
'The level of inventories is still 10 to 15 percent higher than normal in relation to sales levels so a strong revival in shipments to restock warehouses and shops, of the sort that would normally be experienced just before an economic recovery, remains some way off,' IATA said. 'Nonetheless purchasing managers surveys are suggesting some further revival of air freight volumes in June and July of a similar scale to the rise in May, to a level around 12 to 15 percent lower than a year earlier.'
But there's a lot of space to fill, with cargo capacity being used at a rate far below even sagging passenger demand.
'In absolute terms, the less than 50 percent utilization rates show that excess capacity is even more of an issue in freight than the passenger business,' IATA said. 'Freight rates are falling sharply as a result. We know freight yields fell 17 percent in the first quarter, reducing revenues by over 35 percent. Although volumes improved in May this is no guarantee that there was any improvement in revenues, given the continuing downward pressure on yields.' ' Eric Johnson