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Air trade slump highlights task facing G20

Paris, April 7, 2009

Airlines are unveiling more evidence of the uphill task facing world leaders as they seek to kickstart moribund trade, with freight traffic plunging again in March and empty business seats adding to growing losses.

US majors which have reported passenger traffic declines of up to 13 percent were joined on Tuesday by rivals including Air France-KLM. Europe's largest airline said it had carried 9.4 percent fewer passengers and 19.2 percent less cargo in March.

Annual comparisons are less dramatic when adjusted for the fact that the Easter holiday, traditionally a busy travel period in Christian countries, falls in April not March this year.

Yet airline traffic figures are in the spotlight because they provide crucial economic signals for March, for which official data is not yet available, just as the world's economic powers try to breathe some life into flatlining global trade.

G20 leaders agreed last week on a $1.1 trillion package to boost the economy including a $250 billion infusion of funds to unfreeze international trade, about half of which goes by air.

Shares in Air France-KLM on Tuesday fell up to 4 percent. It was the fourth month in a row that the world's largest carrier of international freight, with operations balanced across the globe, has seen cargo bookings drop about 20 percent.

"It just goes to show foreign trade is going really poorly at the moment. We are expecting very weak (February) data for French exports and imports tomorrow," said Alexander Law, economist at French research consultancy Xerfi.

Air France-KLM also revealed a "significant deterioration" in passenger unit revenues in March, days after it abandoned hopes of making money in the just-ended fiscal year.

In Scandinavia, SAS said March passenger traffic fell 16.7 percent  and Finnair said it was slashing ticket prices to try to fill its seats.

The Finnish carrier's March cargo traffic fell 17.5 percent.

Tuesday's stream of data arrived after US-based Delta Air Lines, the world's largest carrier after taking over Northwest, said overnight its passenger traffic fell 13 percent and cargo activity dropped by a whopping 35.5 percent in March.

Delta and Northwest together make up the third biggest domestic airline freight network, according to latest IATA data for 2007.

Out of sight from ordinary passengers, the amount of cargo in the belly of a passenger jet or on special transporters provides precious clues to the flow of unfinished goods in the economic pipeline -- a possible indicator for future activity.

Supply chains in the globalised economy mean exporters increasingly rely on imports of components or semi-finished goods, often from dozens of other countries.

In Europe, factories have resorted to selling from stored inventory, rather than producing more goods from imported parts -- for which trade financing is in any case hard to find.

While cargo volumes have plummeted since December as a result, economists say supply chains are so tight that activity could leap upwards again as soon as the economy begins to stir.

Whether that will signal a true recovery is less certain.

"On inventories, you're probably going to have a technical recovery at one stage; you do hit rock bottom and you can't get any lower," economist Law said.

"But it doesn't mean there will be a pickup in demand. It just means you've emptied out your warehouses and you've got to have a vital minimum to sell."    

Data also coincided with signs that tourism is suffering after holding up relatively well compared with business traffic.

France said tourism, which accounts for 6 percent of its economy, fell 3 percent last year and will fall again this year.

France kept its spot as the world's top tourist destination with 80 million visits last year but there were fewer from Britain, German


Tags: Trade | Passenger traffic | cargo | Air |

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