Demand for air freight, falling on the merits

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Strong demand for air freight, which has helped non-passenger airlines to stay afloat during the pandemic, is showing signs of easing amid growing economic uncertainty, partly fueled by the highest inflation in decades. Reuters.

A potential weakening of the air freight market coincides with growing concerns in the aviation industry that growing passenger traffic, which has reduced airlines’ dependence on freight revenues, could be temporary.

The Baltic Air Freight Index, which shows weekly transaction rates for general merchandise, fell 8.7% last week, while the IATA group of airlines said on Monday that carriers’ revenue from freight transport this year will fall by 6.4%.

Qatar Airways CEO Akbar Al Bakar warned on Monday that inflation is expected to weaken air transport demand and subsequently put downward pressure on yields.

“There will be a decline in business (activities) and when there is a decline in business, people will not buy things that we normally carry as goods,” he told reporters at an industry meeting in Doha.

According to Edward Bell, an economist at Dubai Emirates NBD, consumers and corporations are facing “a kind of whirlwind of price pressures” to which they will be increasingly sensitive for the rest of the year.

Korean Air CEO Walter Cho said transportation fares had dropped, but were much higher than they were before the pandemic, when there was much more capacity.

“The demand is weak, especially since China is practically closed at the moment. We expect him to return soon. I expect the commodity market to be sustainable at least until next year “, he added.

Jose Abramovici, the global head of CIB Credit Agricole’s asset financing group, said the sector is likely to remain profitable for several years, given how high air fares are today.

Cathay Pacific CEO Augustus Tang told Reuters that the cargo loads were not as high as they had been before, as more air capacity was added to the market.

“If there is a moderation, it would be very small, but the trend is still really positive,” he said.

The freight market – both air and ocean – has seen explosive rates since the pandemic, amid huge capacity reductions that have left limited available space compared to transported goods. But now that the economic outlook has turned negative with slowing growth in China, rising global inflation and retailers like Target and Walmart trying to eliminate excess stocks, the outlook is very different from just six months ago. .

The World Bank this month cut its global economic growth forecast by 1.2 percentage points to 2.9% for 2022 and warned that many countries are likely to face recessions.

United Airlines chief executive Scott Kirby said transport fares could moderate as more capacity was added, but demand for goods would remain “very strong” due to supply chain difficulties.

Nabil Sultan, Emirates’ director of freight, said in an interview with Reuters that tariffs will remain where they are for the next six to eight months, given rising fuel prices, while demand may exceed supply. even if more capacity is added.

However, he warned that high operating costs, including fuel and labor, make some routes almost impossible to operate. Emirates is adding more freight routes to China this month, pending an increase in production, which has been affected.