Although the air freight industry appears to be on track for a recovery, a new report by Datamonitor warns of “significant challenges for long-term profitability,” including the possibility of a ‘double-dip’ recession. The report titled, ‘Global Air Freight through the Economic Downturn’ warns that despite the improvements in the closing months of 2009, air freight’s recovery in 2010 is expected to be modest. Datamonitor forecasts a growth of only 1.7 per cent in terms of market value.

“Significant and sustained economic recovery in the US and European economies is needed to really have a flow-on effect on freight volumes,” and while the US posted impressive fourth quarter GDP growth of 5.7 per cent, this still equates to a contraction of 2.4 per cent for the full year of 2009.

The major European economies are tentatively emerging from recession, but with the UK only posting 0.1 per cent growth in the fourth quarter of 2009, the tough times are definitely not over yet, the report said. “In fact, with the major European and US markets still in the nascent stages of recovery, a double-dip is entirely possible in 2010,” the report said starkly.

Datamonitor’s report also predicts a slow recovery in the years to come, forecasting a compound annual growth rate of only 1.9 per cent for 2010-13, highlighting the fact that it will take many years to recover to pre-recession levels. “This downturn has created some unique challenges for the industry, such as ongoing, unsustainable rates in many areas, which could impact carriers’ balance sheets for several years and challenge established supply-chain structures,” it said.

“As one of the most expensive forms of transport, especially for intercontinental freight, the industry has lost cargo not only through overall falls in demand but through ‘modal switching’; that is, the transfer of traffic to slower, cheaper means of transport, such as sea- and land-based freight.

The report highlighted that it remains to be seen whether consumer demand will drive shippers to return to faster transport to ensure that their supply chains are highly responsive. “Globalisation, during the years prior to the downturn, led to long and fragmented supply chains, which in turn contributed to growth in the air freight industry. Air freight carriers will watch the current trend of modal switching keenly to see if it will be halted or reversed.”