IT ALWAYS STARTS WITH CARGO

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By TESTCustomwebLP TESTCustomwebLP October 27, 2010 09:56

IT ALWAYS STARTS WITH CARGO

The International Air Transport Association (IATA) has stated that although global passenger travel has grown in September, the pace of cargo traffic growth has slowed due to waning business confidence.

Passenger traffic grew in September by 10.5%, while the traditionally busiest month of August only recorded a 6.5% increase. But international freight traffic dropped from 19% in August to just 14.8% in September. On a seasonally adjusted basis, passenger traffic expanded by 2.1% with cargo contracting by 2.1%. A decline in cargo traffic was expected but the depth of the drop was not.

Giovanni Bisignani, director general of IATA, said that although high passenger volumes for September was good news, the freight numbers were worrying:

“Freight activity has fallen six per cent since May’s post-crisis peak. What we see in air cargo markets is inevitably reflected in the broader economy,” he said.

Freight movement has always been a reliable economic gauge and these figures show that the global economy is indeed sliding towards the next dip in what most economists have always said would be a W-shaped recession. All the markers are lining up. The EU zone is moving towards interest rate hikes which, especially within the UK, will cause severe economic problems due to the reliance there on the housing market by so many. In the US the commercial sub-prime problems continue and the Fed will be printing money before long. In Japan there remains real risk of default – in fact hedge funds are betting on it.

As air freight tumbles, what do the next few quarters hold for passenger airlines? Most airlines are at this time reporting good figures on the back of higher ticket prices and renewed interest in business class travel but will this trend continue or will the gains simply fall away over the winter season? Economists contacted agree that the risk of a decline over the winter season lasting into late 2011 is a very real risk that “seems more likely by the day”.

Another factor for British Airways, who will see good numbers posted this week, is the UK APD tax. This will cause such high mark-ups on prices that many passengers will choose to fly long-haul via Amsterdam or Paris, saving up to £250 on the ticket price. The long-term outlook for BA is choppy at best. Look to Air France-KLM as possible winners over the next year if they are able to advertise effectively to the public within the UK.

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By TESTCustomwebLP TESTCustomwebLP October 27, 2010 09:56
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