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Air cargo faces severe revenue fall

Giovanni Bisignani, Iata (SUPPLIED)

By Shweta Jain

With a 23.2 per cent drop in its January revenues, the global air cargo industry is currently facing an unprecedented fall in demand and revenues, according to International Air Transport Association (Iata).

The aviation industry body said the forecasts it made in December predicting a five per cent fall in volumes besides a nine per cent revenue decline to $54 billion during 2009, is "now look highly optimistic" for the air cargo sector, which represents about 10 per cent of industry revenues. About 35 per cent of the value of goods traded internationally is transported by air, as per Iata estimates.

"Unfortunately, the shocking fall in demand that followed is making these projections look optimistic," said Giovanni Bisignani, Iata's Director-General and chief executive, while speaking at the ongoing Iata World Cargo Symposium in Bangkok.

However, the Middle East is the only region, which has so far escaped the slump in freight traffic. "By December air freight volumes on international markets were falling in excess of 20 per cent, with the exception of the Middle East. Airlines are cutting freight capacity in all regions, with the exception of the Middle East," Iata said in its cargo report for the first quarter of this year.

"Deepening recessions in Europe and the Far East were also clear from 5-10 per cent declines in shipping. The region bucking this trend, as with air freight, was the Middle East which actually accelerated in December," it said.

However, demand is collapsing faster than airlines can shrink and so load factors have taken a big hit, Iata has warned.

"The industry is in crisis. Cargo demand has fallen off a cliff. After a shocking 22.6 per cent decrease in December it dropped a further 23.2 per cent in January," said Bisignani. "The continued decline in cargo markets is a clear sign that we have not yet seen the bottom of this economic crisis."

Growth in container demand, meanwhile, has also slumped with the exception of the Middle East, Iata said, adding that the spreading ripples of recession from the US late last year are apparent from the decline in container shipping demand.