Bumpy ride ahead for Singapore’s transport sector

Outlook for the aviation and shipping industries have turned gloomy as global travel and trade are likely to remain subdued in 2012.

However, OCBC says land transport is likely to remain stable as ridership levels are unlikely to dip regardless of economic cycles.

Here’s more from OCBC:

Weak leading aviation indicators and high fuel prices. Business confidence and global air freight volumes, which usually fall ahead of air travel traffic during downturns, have been declining in recent months. Both these indicators point to weakening demand in air travel. Together with high jet fuel prices, which have averaged 29% higher than in CY10, there is a prevalent pessimism surrounding the aviation sub-sector.

Aviation service providers' outlook is also gloomy, but longer term prospects are intact. The air of pessimism that currently surrounds the aviation industry may, in the near term, cascade down to the maintenance, repair and overhaul service providers and ground handlers. However, the longer term prospects for MRO players and ground handlers are still positive. Global air travel traffic is projected to continue growing in the long term and the global passenger aircraft fleet is forecasted to double by 2030.

Excess capacity in shipping exacerbated by poor demand. Global trade volumes in 2011 failed to grow in line with earlier expectations. With the global fleet of container ships growing 17% over the past four years, the unfavourable demand-supply dynamics have hit freight rates - the Shanghai Containerised Freight Index is down 24% YTD. Looking forward, excess capacity is unlikely to ease while global trade is likely to remain subdued in 2012.

Singapore's land transport has no viable substitute. The land transportation sub-sector in Singapore has no viable large-scale substitute. Ridership levels are unlikely to dip regardless of economic cycles, as long as the infrastructure maintains its relevance and the cost of private car ownership remain out-of-reach for a majority of the populace.

Likely bumpy ride ahead - seek defensives. The uncertain economic outlook ahead continues to weigh down on business confidence, which in turn negatively impacts global travel and trade volume.