Air cargo, passenger traffic continue drop

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THE global financial crisis continued to affect performance of international cargo and passenger traffic in January, suggesting a deepening year-on-year demand slump.

The air cargo industry has been hardest hit contracting for the eight consecutive month when it tumbled 23.2% in January compared to the year-ago level. In December, traffic also collapsed 22.6%.

The International Air Transport Association (IATA) reported that passenger traffic contracted 5.6% in January, the fifth consecutive month of decline.

The drop in demand outpaced capacity cuts of 2%, driving the load factor to 72.8% or 2.8% below what was recorded for January 2008.

"Alarm bells are ringing everywhere. Every region's carriers are reporting big drops in cargo. And, aside from the Middle East carriers, passenger demand is falling in all regions. The industry is in a global crisis and we have not yet seen the bottom," IATA director general and CEO Giovanni Bisignani said in the report.

"The only good news is that fuel prices remain well below last year's level. But the drop in demand is much more harmful. The industry is shrinking with revenues expected to fall by $35 billion to $500 billion, delivering a loss of $2.5 billion this year," Bisignani explained.

Asia Pacific carriers, representing 43% of the market, led the cargo decline with a 28.1% year-on-year drop. This was followed closely by the other major market players such as the European carriers, which dropped 23% and North American carriers by 19.3%.

According to IATA, while this may appear to have relatively stabilized compared to the December drop, it is too soon to call a bottom in the air freight market as manufacturers are still shedding inventory and cutting production — expected to lead to further falls in freight volumes.

Asian carriers led the decline in passenger demand with an 8.4% year-on-year drop in January. Capacity in the region contracted 4.3%. With Japan, the region's largest market for air travel, expected to see its economy contract by an unprecedented 5% in 2009, the prospects for traffic in the region remain dismal.

North American carriers posted the second-largest passenger decline at 6.2% led by a decline in trans-Pacific travel. In response, carriers withdrew 2.6% of their international capacity, clawing back some of the expansion of 2008.

European carriers offset a 5.7% decline in demand with a 3.6% decrease in capacity. Demand decreased sharply from the 2.7% fall in December as European economies move into deep recession.

Latin American carriers saw a modest decline of 1.4%. Even against a 0.5% increase in capacity, the region turned in the highest load factors at 74.9%.