Caution flags waving as we enter 2012
As 2012 opens, we are concerned about the increasing signs global cargo traffic is softening.
Cargo traffic is typically a leading indicator of passenger traffic, both on the decline and subsequent rise. Cargo traffic fell 25% globally at the start of the Great Recession and passenger traffic soon followed. Cargo traffic began to recover before passenger traffic as the world edged out of recession.
But now, there are several indicators cargo traffic is softening again. IATA figures show traffic is on the decline. Additionally, there have been several developments at individual airlines.
- FedEx ordered Boeing 767-300ERFs to replace its aging MD-10 fleet but it also deferred new-build Boeing 777Fs;
- Cathay Pacific Airways deferred some new Boeing 747-8Fs;
- Atlas Air Cargo canceled three 747-8Fs, based on performance issues, but softening traffic was also believed by some aerospace analysts as having a hand in the decision;
- Jade Air Cargo in China, a joint venture of Air China and Lufthansa, is effectively out of business. There’s not enough revenue and the fleet of Boeing 747-400Fs is grounded for lack of money to pay for fuel; funds are being directed to pay for staff and financing costs;
- Cargoitalia has ceased operations; the MD-11F operator will be liquidated, according to Flightglobal Pro; this is also a blow to the Airbus A330-200F program, according to Flight—the airline had signed a tentative agreement for five A330s.
Airbus and Boeing are ramping up production dramatically on the A320 and 737 lines, with backlogs stretching to 2017. A330 and 777 production is also increasing.
Although both companies successfully managed their skylines through the Great Recession with little noticeable disruption, the last thing they—or the airline industry in general—need is another economic downturn.
Boeing is already watching the cargo traffic closely, but as yet says it is too soon to say if passenger traffic will follow.
Our caution flags are up and waving. We don’t like what we are seeing.