The year 2012 will be another benchmark for the history books of air cargo. It is a year virtually all will be happy to forget. It does however end with some optimism that the prolonged ‘bottoming’ of the air cargo will come to an end soon – at least sooner than later.

As the year comes to a close, global economic growth estimates for 2012 remain weak at just over two per cent, with only a slightly better outlook for 2013, according to the latest figures from the International Air Transport Association (IATA).

European economic growth contracted in 2012 while the US and Japan are set to improve on last year. Looser monetary policy and bank lending standards in the US have helped that economy grow faster than Europe. Banks in Europe are maintaining tight lending standards, helping reduce the risk of another banking credit crisis but also creating a more challenging environment for private investment activity.

And while the demand environment for air cargo remains soft, there are some promising signs, according to IATA. Although world trade continues to expand the pace of growth has been slowing as weakness in European economies persists. However, declines in business confidence signaled by the Purchasing Manager’s Index throughout Q3 have now reversed and stability is indicated for the months ahead, IATA said. Moreover, there is still no sign of an inventory overhang, meaning businesses have no immediate need to reduce quick transportation of cargo.

Demand drivers are weak overall with European consumer expectations of economic improvement declining further and this, according to IATA appears to be the main reason for the depressed demand for air-freighted commodities, as indicated by the decline in semi-conductor shipments.

A positive development, however, is the improvement in US consumer confidence over recent months, reaching levels not seen since early 2008. This could help offset some of the downward pressure on air freight demand, coming mainly from Europe, in the months ahead, according to IATA.

Air freight yields continue to trend downward overall, despite small improvements seen in Q2 and during more recent months and the weakness in air freight demand coupled with excess capacity from declining load factors continues to place yields under downward pressure.

Jet fuel prices have dropped 10 per cent below the most recent peak in September, but levels remains high at just below US$130/barrel and despite nominal wage rate growth slowing further in the US, Europe and China, net profits continue to experience downward pressure.

But, the outlook for air freight is more optimistic, according to heads of cargo surveyed by IATA in October 2012, with the positive sentiment consistent with improvements in business and consumer confidence in some regions. Heads of cargo are expecting increased traffic growth over the next 12 months, and as a result, the outlook for yields is also more optimistic.

Surely not reason to break out the champagne just yet, but at least the persistent bad news now has a slightly brighter tinge to it. Hopefully the new year will bring brighter fortunes as a slow recovery gains ground.

From everyone at Payload Asia, happy holidays and a merry New Year.