Transportation Sector Review: Passenger Demand Up in 2011, Cargo Down

US Airways Group, Inc. (NYSE:LCC), United Parcel Service (NYSE:UPS): The International Air Transport Association reported that full year 2011 passenger demand rose 5.9% compared to 2010, in line with long-term growth trends. In contrast, cargo markets contracted by 0.7% for the year; but recorded positive demand growth in December of 0.2%. Growth in demand lagged capacity increases at 6.3% (passenger) and 4.1% (cargo) putting downward pressure on load factors. The average passenger load factor for 2011 was 78.1%, down from 78.3% in 2010, while the freight load factor was just 45.9%, down from 48.1% in 2010. Improving business confidence and encouraging news from the US economy are heartening developments. But it is far too early to start predicting a soft landing for 2012. The euro zone crisis is far from over. Failure to achieve a durable solution will have dire consequences for economies around the world. And it would most certainly tip the airline industry into the red, the association said.

LCC shares closed at $8.90, up $0.46, or 5.45%, on the day. Its market capitalization is $1.44 billion.

UPS shares closed at $76.78, up $1.13, or 1.49%, on the day. Its market capitalization is $74.09 billion.

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To contact the reporter on this story: Stella Mariz at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com