Airfreight is usually the first segment of the industry to indicate a recovery – and a recession – and this cycle is no different with fragile but discernible improvements in traffic levels such that demand for capacity will start to emerge once more in the first half of 2010, prompting an improvement in lease rentals and eventually values.

The results for September 2009, according to IATA, show a twelve percent improvement in cargo traffic over the low point of December 2008, even if this is seventeen percent lower than the peak of early 2008. The Middle Eastern carriers have recorded a year on year improvement of 3.6 percent. The increase in lower hold capacity through the delivery of new passenger widebodies is responsible in part.

The demand in the early part of 2008 was exceptional not least because of the growth in China and represented a part of the cycle that will not be repeated for at least another two years. There currently exist hundreds of ships that are eagerly awaiting a return to service, potentially reducing the demand for expensive airfreight. A number of airfreight airlines have introduced a considerable hike in prices. This has the potential to constrain any growth. Only a few months ago the head of Lufthansa Cargo stated that if the economy did not pick up in the coming months most of the world’s freighters would need to be grounded. Fortunately, the economic recovery is underway, if only evidenced by a few indicators. The run up to Christmas is usually a busy time for the airfreight industry and there are a number of new products that are certain to be in demand but the rising cost of airfreight, combined with tight margins, has meant that the surface transport has been seen as an alternative.

The values of freighters have been severely affected by this recession. A significant part of the freighter fleet has been effectively grounded such that a proportion will never return to service. The severity of the recession has meant that the retirement of freighters has been accelerated such that values projected for 2011-2012 are already being experienced. The emphasis is on newer aircraft which can offer better efficiencies and when worked hard can lower unit costs. The hiatus to the B747-8F represents welcome relief while the service entry of the A330-200F is still some months away. The conversion of many aircraft has been put on hold. The near absence of new capacity by virtue of conversions or deliveries – there has been only one delivery of a B777F over the last six months – has provided some solace for the existing fleet, contrasting with the passenger sector. The combination of these factors in the face of rising demand next year should see the demand for capacity quickly increase allowing lease rentals of only newer equipment to increase.