Air traffic recovery has begun

The International Air Transport Association said in its latest monthly reading of cross-border traffic, a leading indicator for the health of world trade. --PHOTO: AP

GENEVA - A RECOVERY in air traffic is under way, according to latest data from a global industry body, in another sign the world economy is clawing its way out of recession.

But the recovery will be 'volatile and weak', the International Air Transport Association said on Thursday, indicating the turbulence that has buffeted an industry facing another year of multi-billion dollar losses is not at an end.

Airlines carried 11.3 per cent less cargo and 2.9 per cent fewer people in July than a year earlier, IATA said in its latest monthly reading of cross-border traffic, a leading indicator for the health of world trade. The figures represented an improvement from June, when the year-on-year declines were 16.5 per cent for cargo and 7.2 per cent for passengers.

Air freight is a good leading indicator of world trade movements, since shippers tend to switch to air when speed is more important than cost - at the start of an upturn - and switch to ocean transport in a recession, IATA says. As a result, air freight is first into recession but usually is first out, it said in a recent analysis.

So far this year, freight volumes have fallen 19.3 per cent and air travel is down 6.8 per cent, according to IATA, whose data exclude domestic flights. And compared with June and adjusted for seasonal factors, both freight and passenger travel grew by more than 3 per cent in July, it said.

'The data can be rather volatile but this does confirm earlier signs that a recovery in demand for air transport has begun, though there are good reasons for expecting the path of further recovery to be volatile and weaker than recoveries from previous recessions,' IATA said.

IATA said there was a varied regional pattern, with passenger traffic in the Asia-Pacific remaining weak but improving, with a strong rebound in air freight reflecting recovery in several Asian economies.

Airlines in Europe and North America are seeing less improvement in freight, but a stronger improvement in passenger volumes which could reflect earlier cuts in fares. Passenger capacity was more in line with demand in July, with passenger load factors averaging 80.3 per cent, but excess capacity continued to emerge in the freight sector, it said.

'Downward pressure on freight rates and revenues continues to increase,' said the Geneva-based body, which represents 230 carriers including British Airways, Cathay Pacific, Emirates and United Airlines.

IATA has estimated airlines will lose US$9 billion (S$13 billion) in 2009 after an US$8.5 billion loss in 2008, when high oil prices hit profits and then the global credit and financial crisis slashed demand for business and leisure air travel. -- REUTERS