Glancing at the TranSystems Transportation Activity Index chart, one can’t help but see the variation in red and green indicators. It seems as though most of the elements that deal in passenger traffic are experiencing continued weakness in general – while the freight segments are starting to rebound strongly – some segments of the transportation economy announcing that they will be experiencing significant capacity shortages in the near term. Why is there such a wide disconnect between the passenger segments and the freight segments of the industry? Take a look at the chart below.
Passenger:
Most of the sector figures reported for the passenger transportation segment are reported on a quarterly basis – air traffic being the real differentiator in the group and is reported on a monthly basis. And that may be one of the big differences we see moving forward.
All but light rail service in public transportation ridership group was down, on average more than 3% during the period for the first quarter. Commuter rail, heavy rail (passenger), and bus services were off by -3.07%, -1.45%, and -3.95% respectively. Looking forward, there are projected to be flat performance figures going into the third quarter of the year, the second quarter rebounding slightly for the segment.
Air service in the latest month was improving, and has gained every month since the beginning of the year. The outlook for air passenger services is positive through the end of the year and into 2011. The IATA recently changed the outlook for the entire global air sector, saying that it would shift from a forecast that projected a $2.8 billion loss to a positive $2.4 billion profit. That swing of $5.2 billion worldwide is significant taking everything that is happening in the US and EU into consideration.
What is happening in the sector to create pressure? First, given that most of the passenger statistics lag by a quarter, there is likely to be an improvement in the second quarter of the year across most of the metrics. Using air passenger traffic as our proxy for the second quarter, volumes should improve across all segments of the industry. But, there are still some underlying challenges for the sector. The primary, and foremost factor, is the impact that the unemployment rate is having on commuter ridership. Exacerbating this is the added pressure being brought on by segments of the economy that have been hardest hit in the most urban, densely populated parts of the country. New York for instance, and the fallout over the past two years in the financial sector, has drastically changed the demand for commuter services – making it tough for those segments to show growth. That will change, but the change is taking much longer and job creation in those segments has not showed improvement.
Freight:
All of the freight segments are in full recovery mode. The economy is firing strongly on at least three cylinders – retail, manufacturing, and inventory building across a broader segment of the economy. These factors are helping to drive volumes in the freight segments and the outlook is expected to remain strong in the near future.
We mentioned last fall that there was to be a slight softening of volumes in the early part of the second quarter, a softening that would not necessarily resemble traditional seasonal patterns. That has happened, but volumes are now being reported from most segments as gaining stronger on a weekly basis. As long as demand continues to be stronger, and inventories are weaker, this trend should continue.
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