The prediction comes on the heels of a 7.9% freight volume decline in October compared to the previous October. The decline was the steepest monthly fall in eight years and the fifth consecutive month of what the organization labeled "increasingly severe drops."

"The deepening slump in cargo markets is a clear indication that the worst is yet to come," says IATA director general Giovanni Bisignani. "The gloom continues and the situation of the industry remains critical."

The October decline was particularly steep for Asia-Pacific carriers, which handle 45% of world air-cargo volume. They suffered an 11% decline for the month, as did Latin American carriers. North American and European airlines reported smaller drops of 7.6% and 5.4%, respectively, while African carriers actually saw volume rise 3%. Middle East operators also showed an increase of 1%.

Though the October decline was steep, reports from individual carriers suggest November might be worse. Europe's largest air freighter, Lufthansa Cargo, reported a 9.8% year-over-year cargo volume drop in November primarily due to pared shipments on key Americas and Asia-Pacific networks. The German company's revenues were off 6.7% and the load factor, or capacity utilization, fell 6.5 points to 66.4%. The continent's number two carrier, Air France-KLM, reported a 13.2% drop for the month, while number three British Airways showed a 7.2% decrease. At Lufthansa, cargo traffic for the first 11 months was 4.7% below last year's levels.

Many people within the industry had hoped the fall in oil prices would translate to a boost in cargo volumes, but the global economic crisis appears to have more than offset any benefit gained by lower fuel costs. "While the drop in oil prices is welcome relief, recession is now the biggest threat to airline profitability," observes Bisignani.

According to the IATA exec, the macro economic situation has become the dominant factor driving both air freight and passenger loads. Though cheaper fuel and excess capacity have pushed costs down, reduced product and commodity demand has led to reductions in air cargo needs, while income loss or fears of income loss have reduced passenger travel. The organization projects airlines will lose $2.5 billion next year.

In regard to the coming year, IATA expects North America to be hit especially hard, with a 4.8% drop in cargo volume, followed by Europe with a 3.6% decline and the Asia-Pacific region with 2.5%. The organization projects increasing volumes only in the Middle East, with a 1.2% growth in volume forecast. African volumes are expected to remain static.

Instant Insights /

Air Cargo To Fall 5% Next Year, Report Predicts

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