Since 2011, air cargo shrinks as passenger volumes, yields rise: IATA

A 5.3 per cent growth and a three per cent increase in yield in air passengers has been contrasted with a two per cent fall in air freight tonne-kilometres and cargo yield, according to the International Air Transport Association (IATA).

The divergence started in early 2011, noted IATA analyst Julie Perovic as world trade grew three over years while air freight volumes and yields fell, reported Atlanta area Air Cargo World.

The utilisation of freighter aircraft has slumped below 42 per cent, inducing all-cargo operators to target marginal markets where they don't have to compete passenger aircraft bellyholds.

"For the pure freight guys it is going to be tough," Niko Herrmann, an aviation specialist at Oliver Wyman in Zurich told Bloomberg. "Carriers may be forced to seek partnerships and consolidate to gain scale, or to exit the market."

Forecasts from IATA, which represents 240 carriers, does not expect profits to rebound in the US$70 billion market soon, with cargo yields expected to fall two per cent this year and 1.5 per cent next.

Rafael Echevarne, economics director at Airports Council International, said high-value goods volumes, a staple of international air freight, have declined as people rein in spending.

Flagging demand and a night-flight ban in Frankfurt led sales at the Lufthansa Cargo business to slump 9.7 per cent in the first nine months, with operating profit tumbling 62 per cent to EUR66 million (US$86 million). The carrier has responded by grounding capacity equal to two of its Boeing MD-11 freighters.

Another factor was a shift of trade volumes to sea freight and type of cargo changed from emerging markets of China, India and Latin America were bulk commodities by sea rather than flying low-volume, high-value goods.

The US with nine per cent of trade growth and Europe with seven per cent have lost their dominance, reported Atlanta-area Air Cargo World.

IATA has upgraded its forecast for airline profits, which are now expected to reach US$6.7 billion in 2012 and increase to $8.4 billion in 2013. But IATA chief executive Tony Tyler, former CEO of Hong Kong's Cathay Pacific Airways, warned the industry needs a margin of seven to eight per cent to recover its cost of capital and said he anticipates carrier bankruptcies ahead.

Said IATA chief economist Brian Pearce: "There are more downside risks than upside risks, in particular the continuing weakness in European economies, the American fiscal position and Middle East geopolitical issues."