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.
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.
Many (including myself, on my own blog) have called it that there is yet another economic downturn coming within 3-5 years of the previous economic downturn.
What’s interesting is that even with $ trillions being printed (well, probably a few computer keystrokes) the past few years, there is still economic malaise.
There are a lot of structural issues which need to be addressed and fixed.
With the global financial crisis ostensibly getting worse (especially in Europe and possibly China as well), I see this affecting the order books for Boeing and Airbus (probably the other manufacturers as well).
How this “plays out” is anyone’s guess however.
In the US, it could be argued that there has not yet been a recovery in the economy. In Europe, any recovery they may have had has been essentially wiped out by some member countries. In Asia, the economic situation isn’t looking as good as it was. But for manufactuers, of all types, that could mean lean years in sales are ahead.
Germans are still buying like there is no tomorrow ( which might be true 😉
Property doesn’t inflate in contrast to savings.
The US is stuck by marginalisation of the middle class which kills growth.
China will regress to large single digit growth. In contrast to all other global participants they do have the assets for deficit spending if neccesary.
To close a reading tip:
Roger L. Martin : Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL
While the massive number of Boeing/Airbus airplane orders kept coming, I was
wondering where all the passengers would be coming from, to fill all those seats!
Yes, they would partially replace older and less fuel-efficient aircraft, but I agree
with Scott, that taking the “slowdown” in the European, Chinese and possibly
even the US economies, CAUTION is the key word!
The way I see the situation is that the record airplane sales we have seen lately are not in tune with the world economy. There is a disconnect between economic growth numbers and airplane sales. There is a lot of instability and uncertainty in the world economy right now. That translates into a high potential for cancellations, and airlines around the world could stop buying new airplanes overnight if we were to go through a world recession.
The emerging countries are still doing quite well, but the US and Europe, the two largest economies in the world, have systemic problems that won’t go away in 2012.
The current cargo traffic situation you describe may be what triggered the cancellation of the A320 P2F program and the reluctance to satisfy Qatar Aw. with a new program of A332 P2F.
There are of course other reasons, but the market situation must have been the driving element.
talking of downturn in aircargo the EU is outlawing screening air cargo by decompression chambers on the 2/1/2012 and telling shipper of outsize cargo to put it it a container and put it on a ship as the is nothing on the market to find the item what distroyed & killed 270 folks on Pan Am 103 only a decompression chamber can find the item.