[110214.EN.AIR] IATA Chief Warns Airlines of Another Year of Weak Cargo Markets

DESPITE improved performance last year, the International Air Transport Association (IATA) expects continuing weakness in air freight markets in 2014, says IATA director general Tony Tyler, former CEO of Hong Kong's Cathay Pacific Airways.

"Air cargo continues to be weak and for the big airlines in this region, it is a very important component of their revenue," Mr Tony Tyler told a news conference ahead of the Singapore Airshow.

"Based on the most recent numbers from the carriers, there is reason to be at least a little bit worried and 2014 is expected to be another challenging year." he said.

In the fourth quarter, United Continental Holdings' cargo revenue dropped 9.5 per cent to US$220 million. For the year, United's cargo revenue fell 13.4 per cent to $882 million. Cargo represents just 2.3 per cent of the company's revenue, but, given the thin profits that airlines are running, losing cargo revenues makes it harder to make money.

American Airlines depends more on cargo revenue. Fourth quarter cargo revenue rose 13.9 per cent to $196 million and full-year revenues rose 1.4 per cent to $685 million.

Delta Air Lines did not break out cargo revenues, but the number of cargo tonne miles flown by the airline fell 3.7 per cent in the quarter and year on year. Delta estimates that its cargo operations will generate $1 billion in revenue in 2014, about half what its baggage fees and other service charges generate.

In its fiscal second quarter, which ended in November, FedEx reported a slight revenue decline due to lower express freight revenue. The company was able to show a profit because it raised its package shipping rates.

United Parcel Service said fourth quarter revenue per package declined 1.3 per cent. The company also said revenues in its supply chain and freight segment fell 5.8 per cent to $2.3 billion due primarily to reduced tonnage and lower revenue per kilogramme in the company's international air freight group.

The total air cargo market grew 1.4 per cent in 2013 and the industry needs to do better this year, he said.

The problem is one of speed versus costs, he said. "Customers still need speed, quality, reliability and efficiency. And we need to get better at delivering it through improved technology and modern processes. This will be a year of change for air cargo," he said.

Source : HKSG.