Middle East on top as global freight growth slows

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TIGHTENING BELTS: During May, Giovanni Bisignani stressed the importance of firms slimlining costs wherever possible in the face of the current oil price crisis.

Last month, IATA released its May figures for international freight traffic, which showed that air cargo growth worldwide had slowed to just 1.3%, substantially down from the 2007 full-year high of 4.3%.

According to the body, the considerable May fluctuation was caused by the earthquake in China and the instability being faced by the Japanese economy.

In addition, Asian carriers also experienced weakness in the trans-Pacific sector, as a result of rising competition from US carriers taking advantage of the failing greenback.

During May, the price of jet fuel averaged around US$160 a barrel, an astonishing 87% increase on the same period last year, and a higher rise even than the cost of a barrel of crude year-on-year, which stood at a still-shocking 81%.

"Jet fuel margins are increasing the impact of skyrocketing oil prices for the aviation industry," announced IATA CEO and director general Giovanni Bisignani. "Unit costs are up 20-30% and that is inevitably going to take its toll on the bottom line. Efficiency everywhere is the imperative. That must be understood by governments, labour and our industry partners."

The results came after a month that saw Bisignani deliver two key speeches warning that various solutions were needed to drive down costs, including better IT solutions, Global Distribution Systems (GDSs), security and air traffic management and operations.

"Everything is changing with the high price of oil," stated Bisignani, during his keynote speech at the SITA Air Transport IT Summit.

"With fuel accounting for 34% of industry costs, airlines are feeling the impact more than most. Cost savings are crucial in every corner of the business, but there is not much low hanging fruit left."

In the Middle East, however, the picture is different, with volumes rising 10.7% on the back of oil-based economic growth.

"The air cargo growth driver in the Middle East is undoubtedly the infrastructure developments taking place," observed Des Vertannes, Etihad Airways' executive vice president, cargo.

"Additional revenues from high oil prices have enabled countries across the region to enhance their investments in projects linked to tourism, development of non-oil and gas industries, health, education and transport infrastructure.

"Abu Dhabi alone is home to around 1.4 million people and it is estimated that this will rise to between three and five million people by 2030, as the city becomes an even more important regional hub for business and tourism," concluded Vertannes.

Speaking to Air Cargo Middle East & India, IATA's chief economist, Brian Pearce, outlined the ways in which the industry body can help those airlines that are feeling the pinch.

"IATA's work on fuel reduction last year saved the industry $2.1 billion last year - by shortening routes and providing consultation to help airlines improve operating procedures. This work continues aggressively this year. IATA has also launched a campaign to engage airports and air navigation service providers to find added efficiencies and cut the rates they charge airlines."

"However, the Middle East has been significantly outpacing the global projection of about 5% growth per year between 2007-11," Pearce added.

"Year-to-date freight volumes are up 11.8%. The oil-based economies in the region are driving growth in both the passenger and cargo sides of the business."

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