Key points:

·         Cargo profitability has come under downward pressure in Q3;
·         The minor improvement in air freight demand in H1 has stalled, yields have declined, and oil prices are surging once again;
·         Continued expansion in world trade has helped air freight markets stabilize, as has the lack of an inventory overhang;
·         But the growth momentum in trade volumes is slowing, and business confidence has been declining for the last 3 months;
·         Demand drivers have also weakened, with consumer confidence falling in China, the US and particularly in Europe,
·         And with capital investment intentions by Japanese and UK companies declining;
·         Freight load factors stabilized in H1 2012, but aircraft utilization has been declining, and freight rates continue to be under downward pressure;
·         Looking forward, cargo heads surveyed in July 2012 have become more cautious, expecting cargo yields to decline over the next 12 months, and traffic to increase only modestly.

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