Bangkok--22 Apr--Standard & Poor's
Few other sectors exemplify the woes associated with the global trade slowdown as keenly as the transportation sector, given its role as the conveyor belt of the world economy, said an article published April 20, 2009 by Standard & Poor's.
The drop-off in aggregate demand worldwide has taken a heavy toll on this sector in recent months, exacerbating the leverage embedded in certain subsegments of the industry (such as shipping) along with other industry-specific factors.
As the volume of goods being traded internationally takes a hit, issuers in the transportation sector will feel the pressure on their credit quality, according to the article, titled "Global Trade Slowdown Puts Up A Roadblock To The Transportation Sector."
"We expect more downgrades and defaults down the road," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group, "though the global nature of the sector and its exposure to other regions that may be quicker to recover, notably Asia, might provide some offset."
Negative bias for the transportation sector, as with nonfinancials in general, is up markedly since the end of 2007. (Negative bias is defined as the proportion of entities listed with either a negative outlook or ratings on CreditWatch with negative implications.) Negative bias for total global transportation was at 36% on March 23, the highest level since February 2002. Airlines (61%) and shipping (57%) had particularly high negative bias among major transportation subsectors.
A significant deterioration in the operating environment for transportation has resulted in substantial excess capacity in some segments (such as shipping). Weakness also has spread to the trucking sector, as demand for retail goods has weakened trucking volume. Airlines have benefited from lower fuel prices but have seen a drop in passenger demand.
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