IATA: Cargo traffic surge likely to slow going forward

Cargolux 747-400F. Photo: By Rob Finlayson.

International air cargo traffic growth is likely to slow for the remainder of 2010 and 2011 following the sector's rapid rebound from the recession, according to IATA.

In its third quarter "Cargo E-Chartbook" report issued this week, the organization said that "all the key indicators" for airfreight point to a slower pace of growth "from now on," though it emphasized that a "double dip" recession does not appear likely. "The confidence of purchasing managers—an excellent leading indicator of airfreight—peaked several months ahead of the May peak in airfreight growth," IATA noted.

Overall, international air cargo traffic grew at an annualized rate of more than 20% in the 2010 first quarter but the growth rate "halved to 11% by July," the organization stated. It noted that there is "much variation between regions" regarding economic recovery: "At the weak end is Europe with continued sub-trend growth. At the buoyant end are the emerging economies in Asia, the Middle East and South America."

The regional variation in the pace of recovery led to "widely divergent freight demand seen across different trade lanes," IATA said. But the gap is narrowing as "the surge of airfreight in Asia and South America is now slowing, while trade across the Atlantic and from Europe to Asia is now catching up."

The organization explained that the sharp air cargo traffic drop during the recession and subsequent fast rebound were driven by a volatile business inventory cycle: "Peak reductions in inventories came at the end of 2008, when the recession caused a surge in the inventory-sales ratio. After that, business slowed the pace of destocking and, from mid-2009, started to rebuild inventory, which caused the surge in airfreight. Now that the inventory-sales overhang has disappeared, business will only add inventory at the pace of final sales. As a result, airfreight growth will slow to the single figure growth of final sales."

IATA noted the continuation of booming semi-conductor production in Asia, a key indicator for air cargo, could be slowed by weak consumer confidence in Europe and North America. "Consumer demand for electronics and other [typical air cargo] products has not recovered" in Europe and North America, it said. In China and other emerging markets, however, "consumers…continue to grow in confidence, unburdened by the debts and unemployment of western economies."

While cargo traffic has recovered to pre-recession peaks, yields remain 10% below 2006-07 levels and consequently "there is still some way to go before [cargo] revenues have recovered," IATA said.