Belgium Freight Transport Report Q4 2009

Belgium-based Cargo B Airlines has ceased trading, it was reported in early July. Niek van der Weide, commercial executive vice-president, said the airline had failed to attract investment. He added that load factors had been on target, but because of the current market condition, yields were too low to make the operation viable. The airline was not expecting any improvement in the near future and low operating charges, due to increasing competition, had added to the problem, he said. Industry observers believe deteriorating market conditions and external cost pressure forced the company to close. BMI points out that the airfreight industry has been battered in recent months by high fuel prices and declining traffic volumes. We do not expect a recovery in 2009 as the global financial crisis squeezes air cargo volumes.

In our latest Belgium Freight Transport Report, the overriding story continues to be about the impact of the recession on the freight sector. We expect Belgian GDP to fall by 2.4% in 2009, and for there to be near-zero growth in 2010 (+0.2%). As a result, average annual GDP growth across the 2009-2013 fiveyear forecast period will be only 0.7%. We expect annual average growth in freight carried across all modes, measured in million tonnes-km (mntkm), to be 1.2% during the forecast period. Despite the poor market conditions, this rate will be supported by greater infrastructure investment. Although we are relatively confident of the industry's resilience, the risks to the freight sector do lie on the downside, particularly because of the intensity of the European and global recession.

For the 2009-2013 forecast period, we expect the value of activity in the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 1.1%, versus 0.7% for overall GDP. The total value of transport and communications GDP will rise to US$34bn in nominal terms by 2013, representing 6.8% of Belgium's GDP.

Our overall forecast for freight carried in Belgium is for low growth based on a mature industry, good infrastructure, a reduced economic growth rate, and the country's openness to foreign trade. We see the best performing sector to be shipping, which despite the downturn in trade levels in 2009 will benefit from strong growth in subsequent years. Airfreight, which - with annual average growth of 0.9% - will come through another period of relative turbulence in the sector. A smaller European carrier, SN Brussels Airlines is likely to be absorbed by Lufthansa in the current round of regional consolidation. If the full takeover goes ahead over the next two years, it will not necessarily be negative for airfreight volume growth, and could conceivably boost it further. Rail freight and pipeline throughput are both expected to grow by an annual average of 0.7%, on a par with GDP expansion - this is due to new investment in infrastructure. We see road freight also in line with GDP, with an average annual growth of 0.7%, reflecting the impact of the recession on freight demand. Inland water transport will grow by an average of 0.3% per annum.