Financial analysts expected U.S. airlines would report increased losses in the first quarter in view of continued high fuel costs and volatile pricing. An industry analyst at J.P. Morgan raised his forecast of a $300 million industry loss for the quarter to $900 million. At Credit Suisse First Boston, the estimate (excluding US Airways and United) was for a $654 million loss. When the two airlines are included, the loss is estimated to increase to $1.5 billion.

Some U.S. airlines reported capacity increases in anticipation of an improved passenger season, and analysts blame at least part of the price volatility on the increased number of available seat miles. The capacity increase is a mixed blessing for air cargo shippers. If the seats go unfilled, it allows greater weight for cargo. However, airlines have been increasing the use of regional jets on some lanes to bring available seats into line with demand. Where increases are a result of more regional jet service, shippers will see little, if any, benefit.

Domestic shippers have been shifting more air shipments to surface modes in an attempt to manage costs more closely. This has reduced the volume of cargo moving on domestic air carriers.

International lanes have shown some increases, especially those linked to Asia. China Southern Airlines finalized a deal to acquire 15 A320-200s and six A319-100s which will begin delivery in first-quarter 2005. Malaysia Airlines announced it would expand its cargo capacity by 30% by adding destinations. It had added three 747-200Fs to its fleet in recent months. Meanwhile, Singapore Airlines said it would sell eight of its 747-400s to two undisclosed buyers. The aircraft will be converted to freighters.

Earlier, Logistics Today reported Air France Cargo had announced a 13% capacity increase in cargo service during the April-October season. Lufthansa, which reported a record net loss for 2003, is focusing its Lufthansa Cargo unit's efforts on increasing the level of value-add services as it attempts to balance the volatility of the airport-to-airport market. It should benefit from strong growth and capacity constraints in the Asia Pacific market, according to Transport Intelligence.