IATA expects the cargo market to begin showing signs of a slight pick-up with freight volumes dropping about 10% over the next few months, compared to the 22-23% declines recorded in recent months.
IATA last week reported a 22% year-over-year drop in international FTKs for February. This follows 23% declines in January and December, but IATA chief economist Brian Pearce does not expect such precipitous drops to continue.
"There may be some light at the end of the tunnel with air freight," Pearce told reporters today during a briefing at IATA's Washington office. "We seem to be reaching a floor."
He adds the cargo market "is no where near the point" where a full recovery is expected but "we're looking more at 10% drops" in monthly freight volumes.
Pearce says the amount of freight carried by IATA members has been relatively flat the last few months. He expects there could be a slight pick-up in this figure over the next few months but FTKs will still be roughly 10% below last year's levels.
IATA began recording year-over-year drops in FTKs last June but for the first three months - June, July and August - the drops were less than 3%. In September and October the drop reached 8% and in November it reached double-digit figures at 14%.
Pearce says IATA bases its projection that cargo traffic will go "sideways" rather than down the rest of this year partly on surveys which show shippers are not as unoptimistic as they were a few months ago. Inventories are also at record lows and cargo carriers including FedEx have recently indicated they are seeing some stabilization in the market.
Pearce, however, warns IATA's cargo projection could prove to be wrong. He says while cargo figures appear to be holding at a shelf at the bottom there is always a possibility there could be another fall from this shelf.
If IATA is "wrong about cargo" Pearce says it may have to revise again its 2009 loss projection. Last week IATA revised its projected losses for the year, estimating its members will collectively incur $4.7 billion in losses in 2009 compared to its previous projection of $2.5 billion. But Pearce says actual losses could be even worse if the cargo market doesn't start to pick up as expected.
Pearce calls the drops recorded in the cargo market the last three-to-four months unprecedented and says they were driven by drops in manufacturing. He says manufacturing output in five of the world's major economies - Japan, the US, Germany, South Korea, and Taiwan - have all declined by 15% to 30%. He explains manufacturing is a "pretty fast indicator of what's happening in the economy" and these drops "reflect what is happening with international trade".
Pearce adds: "Since November and December there's been extraordinary fall in air freight [FTK]. They are down pretty much one quarter, which we never saw before."
While IATA sees cargo figures having bottomed out in February Pearce says "that's not the case with passenger travel". IATA passenger volumes were down 10% in February, surpassing the 6% drop recorded in January and the 5% drops recorded in November and December.
"Passenger travel continues to be declining," Pearce says. "We haven't seen yet an end to this process. Hopefully it will happen sometime soon."