The business environment for air cargo has continued to decline in the last quarter of 2011.

Key points for Q4:

• Air cargo growth rates started to fall in the middle of 2011, the last quarter has been no different, with all major routes declining further;
• Banks have started to reign in their lending propensity as lack of debt resolution in the Eurozone continues; as is to be expected, governments made further cuts to expenditures, despite suboptimal growth levels;
• Although there is no obvious inventory overhang, pessimistic expectations are driving the need for air freight down, with purchasing managers confidence index indicating no growth prospects;
• Cargo rates have continued their decline in an unsupportive economic climate. Downward pressures on revenues have persisted, with some regions suffering more than others. The revenue outlook looks weak;
• Jet fuel prices have stayed high over the last several months, despite the weak economic climate;
• Freighter aircraft are being reduced, but the increase in twin aisle aircrafts in more than offsetting that reduction, keeping cargo capacity high; large deliveries planned for 2012 will exacerbate that condition;
• With competition from declining sea freight rates and flat trade indicators, there is no sign of growth; lower competitor rates are supporting substitution away air freight, but business expectations are also driving the shift;
• Although about 50% of airlines are meeting and exceeding their cost of capital, the results are passenger and seasonality driven, as heads of cargo indicate a much less confident outlook.
  
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