Signs of recovering air cargo demand in some regions
Downward pressure on cargo profitability eased slightly in Q2 following an improvement in air freight demand, a small rise in yields, and a decline in oil prices. Freight load factors bottomed out at the end of 2011, along with a hesitant and narrowly based upturn in demand - worldwide FTKs have expanded by 2% in April compared to the lows of Q4.
Improvements in business confidence and growth in world trade have supported this expansion, as has the absence of an overhang in business inventories. However, the improvement in air freight is not widespread, with weakness in European and Chinese consumer confidence keeping demand for air-freighted commodities down in those regions.
Furthermore, expected increases in belly-hold capacity are likely to continue to make asset utilization a challenge. Looking forward, cargo heads surveyed in April 2012 expect downward pressure to ease on cargo yields over the next 12 months; but risks associated with the Eurozone remain a threat to this improved outlook.