Capacity increase dents freight load factor

The word is that financial markets are continuing to view airline financial prospects positively – and airline shares are growing in stature as financial prospects improve. That saw shares up 28% in 2010, according to the International Air Transport Association (Iata) airlines financial monitor for the year up to November- December. Capacity growth is running ahead of traffic – especially in the cargo market – and fleet expansion is to accelerate. Supply-demand conditions are finely balanced in air travel markets, said Iata. Airlines have added passenger capacity at an annualised rate of 7.8% over the 11 months to November, compared to an annualised growth in traffic of 7.2%. The equation is more lopsided for cargo – capacity up 7.9% on a traffic increase of 5.6%. Having said that, freight capacity is still 2% below what it was prior to the recession, according to Iata. There were a further 94 new aircraft deliveries in November – similar to average for the year so far, of just under 100 each month this year. Almost 50 aircraft were removed from storage during the month. Some of that number will have been scrapped but the bulk will have returned to service. With 1 400+ deliveries scheduled for 2011 (just under 120 per month) an acceleration of fleet expansion lies ahead. And aircraft utilisation rates returning to more normal levels will likely further push up overall rates of capacity growth in the year to come. Another detrimental point for the cargo business is that the faster rate of capacity increase has put a dent in the freight load factor. “After tracking 3-4 percentage points higher than 2007 levels in the first half of 2010, the load factor has fallen back,” Iata told FTW. “However, at still about 1.5 percentage points higher than 2007 levels, this is still considered a relatively high level of capacity utilisation by historical standards. The immediate forecast is also negative. With growth in air freight moving into a slower post-restocking phase, the association feels that freight load factors could come under further downward pressure in months ahead.