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Cargo e-Chartbook is IATA's quarterly report on key issues driving the air cargo industry. It features insight and analysis of the cargo market financial performance and outlook from IATA's Chief Economist.

Overview of Q1 2011

Developments since December have been mixed. Confidence in economic growth, outside Europe, has improved. But margins are being squeezed as capacity grows, hampering yields, and fuel costs surge.

Headlines By Section

• Economic Outlook: Economic growth is slowing in 2011 as monetary and fiscal policies are tightening. However, the slowdown is less than previously expected. Emerging economies continue to be the fastest growth regions. Europe and Japan continue to be the weakest.
• Traffic Growth: Air freight volumes had peaked in May 2010, as the business inventory cycle came to an end. Companies no longer needed rapid air shipment to restock. However, final demand continues to expand and a sharp upturn in January air freight points to a second leg to the upturn.
• Demand Enironment: Leading indicators for cargo demand, such as the purchasing managers’ index, have risen to new highs, having slipped back in the second half of 2010. The restocking cycle has clearly ended but there are signs that expanding final demand is again boosting air shipment intentions.
• Demand Drivers: World trade expanded once more at the end of 2010, having paused during the middle of the year. Prospects for further trade expansion look good. Domestic drivers remain mixed. The cash-rich corporate sector is spending on capital goods. Consumer confidence has been rising in the US.
• Revenue and Yields: Cargo yields peaked in mid-2010 before softening through the rest of the year as load factors slipped. Average yields were stable during the second half of the year, but the SE Asia-Europe market saw a significant fall back. Cargo revenue growth likely to be in single figures this year.
• Costs: The cargo industry has passed the low point in unit costs. Utilization of aircraft is back to pre-recession levels. Wage pressures are starting to build. Jet fuel prices have risen significantly. $10-15/b of current $110+ oil prices is geopolitical risk. Even if tensions subside fuel prices still high.
• Capacity: Capacity is starting to become an issue for the cargo business. The freighter fleet is unchanged but capacity from twin-aisle aircraft has risen and 8% is due to be added this year. Many of these new aircraft will replace existing fleet but there is an excess capacity risk developing.
• Competition: Falls in the Baltic index and sharp slowdowns in the growth freight rates reflect emerging capacity not demand weakness. However, air freight is now starting to lose share to ocean as the economic cycle shifts from restocking to consumer and business capital spending growth.
• Profitability: Cargo margins are still good but are showing signs of being squeezed between stabilizing yields and rising fuel costs. Heads of cargo report confidence in volume growth but much less confidence in gains in yields.

Download the complete IATA Cargo e-Chartbook Q1 2011 (pdf)