The highs and lows of global aviation

The global airfreight industry is wrestling with the same issues as the rest of the aviation industry: a lurching global economy, skyrocketing fuel costs, fluctuating currency exchange rates, increasing security regulations and environmental initiatives. According to the data released by the International Air Transport Association (IATA), the worldwide air transport of freight remained largely unchanged until June this year, after which it continued to fall until October 2011, and since then the market has shrunk by almost 5 percent. This is primarily because purchasers have adopted a weaker economic stance by curtailing airfreight and switching to slower and cheaper modes of transportation. Asia enjoys 40 percent of the world freight market and hence lower freight as it is the hub of manufacturing. However, recently, Asian airlines cut freighter fleet as a response to cost-cutting tactics adopted by the importers. This has resulted in decreased utilisation and load factors for freight. Although Asia pacific is highly exposed to failing freight volumes, their airlines still manage to generate highest load factors compared to the rest of the world. Yet the region has experienced a sluggish growth due to falling exports. The air travel industry, on the other hand, depicts a wavering future with falling demand and deteriorating business confidence. Compared to airfreight, the trend for air travel is upwards but a sharper decline in air travel is likely in the months ahead. The trend in the global international passenger market over the past five years suggests an upward movement in revenue passenger kilometres (RPK) though with a slowing pace. A comparison of regions year-to-year growth rates reveals that the RPK for North American airlines are dwindling, primarily because of falling demand in the US. In the European region, despite the euro crisis, most of the capacity additions and traffic growth have been by European airlines. Similarly, the long-term view of the domestic worldwide air travel demonstrates a growth marked by retarded post recovery recession. On a regional basis, the USA domestic market registered a decline compared to the emerging markets. However, due to capacity cutting, it has been able to keep load factors high. China has added capacity and improved its load factors by 83 percent, which has led to improvements in Chinese airlines. Brazilian and Indian airlines have also shown growth, while Japan continues to recover from the earthquake and Tsunami earlier this year. The airline industry in Pakistan is in its worst phase. According to the Global Competitiveness Index 2011, Pakistan ranks 81st out of 139 in terms of air transport infrastructure. This low score is attributable to corruption and poor governance in the airline sector, besides other hurdles such as rising inflation, political instability, poor policy making and crime rates. Although the passenger load factor and the freight load factor for the airline industry in the country show a rising trend towards the end of year 2010, the global airline outlook for 2011 still suggests that these indicators have a diminishing trend due to capacity constraints and cost-cutting in the wake of economic recovery.