Impact of unstable Economic on Transportation
Like many economic activities that are intensive in infrastructures, the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, and the unstable economy hey can have an economic cost such as reduced or missed opportunities. Transport also carries an important social and environmental load, which cannot be neglected. Thus, from a general standpoint the unstable economic impacts on transportation can be direct and indirect:
• Direct impacts related to accessibility change where the unstable economy is disabling larger markets to save time and costs.
• Indirect impacts related to the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases.
Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition. Economies that possess greater mobility are often those with better opportunities to develop than those suffering from scarce mobility. Reduced mobility impedes development while greater mobility is a catalyst for development. Mobility is thus a reliable indicator of development.
Providing this mobility is an industry that offers services to its customers, employs people and pays wages, invests capital and generates income. In many developed countries, transportation accounts between 6% and 12% of the GDP. Transportation accounts on average between 10% and 15% of household expenditures while it accounts around 4% of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub sectors. Public/Private transportation is hug on the development of the economy but if the economy become unstable like today' it can have a bigger effect on the transportation. They pretty much work hand and hand. They provide mobility, can shape land use and development patterns, generate jobs and enable economic growth. http://people.hofstra.edu/geotrans/eng/ch6en/conc6en/carlandarea.html
Economic development is linked with transitions in passenger mobility from non-motorized (mainly walking) to motorized forms of transportation. The initial stage of this transition involves the development of collective forms of transportation (tramways, subways, buses) while individual forms of transportation (mainly the automobile) become more prevalent at a later stage. This is particularly linked with the growth of individual incomes where at some point individual motorized mobility becomes affordable. While in developed countries this transition took place over several decades, if not a century, many developing countries are experiencing a fast mobility transition, which is placing pressures on the transport system to cope. Toyota

The Japanese auto manufacturer was a symbol of economic and global prosperity. In today’s tumultuous global economic state, Toyota has fallen on uncertain times. Toyota is such an influential firm that it is viewed that the economic well being of the company is also an indicator of the economic state of Japan. Toyota is Japan’s largest company in sales and is also Japan’s largest taxpayer. In the 2000s Japan had a weak Yen which greatly benefited Toyota because this helped lead to a large export surge for the company. In recent times however, the economy has seen a major economic downturn. In 2009 Toyota reported a net loss of $4.2 billion. Toyota has been in a cost cutting mindset ever since by retooling current plants for cost saving as opposed to using more overseas factories like rival Japanese automakers, Nissan and Honda. The earthquake in Japan has had economic ramifications throughout the world and Toyota’s business has been affected across the globe. In September 2011, Toyota reported a 17.5% drop in U.S. sales due to what Toyota claims to be inventory issues what were caused by the disaster. Another major concern in today’s economic climate, as it relates auto manufacturers, is the rising cost of oil. This has become a major issue for customers as the increase in gas prices has had a great influence in the purchase of new automobiles. With more gas conscience consumers and lagging sales Toyota has agreed to new fuel economy standards set by the United States government. Agreeing to such standards would not have been a consideration if the market climate were that of a decade ago. Toyota has also been forced to expand its market share because of stagnating economies in much of the traditional global powers like the United States and much of Europe. This had led to Toyota export cars made in Indian to South Africa as Toyota explore new options for revenue.

General Motors

American automaker, General Motors, is the world’s second largest automaker. With the economic instability has that taken over in the last few year, perhaps no other automaker has been as dramatically affected by it. What was once of the most prosperous companies in the world had to file for reorganization under Chapter 11, Title 11, United States code. The United States, as well as Canada, own 49% of the company. After filing for bankruptcy, GM hoped to have a speedy recovery but a weak economy as slowed things down for them. With the lack of jobs being created and the rise in gasoline prices any type of economic recovery has been called into question. General Motors is generally tied to the GDP of the United States and economy and GDP of the U.S. has become stagnant. In light of the domestic stagnation GM is trying to become a greater force in the international market. GM has seen recent success in China and is trying to become a greater force in Asia. In the first in 2011, GM has reported sales of over a 1 million units. With European market struggling greatly GM has also set its sights on Brazil. Brazil is the third-largest market for GM and Brazilian market is only expected to grow. GM expects sales to increase from 650,000 units in 2010 to 700,000 units in 2011. The economic downturn of the traditional western powers has led to the rise of the B.R.I.C. (Brazil, Russia, India, and China), and General Motors wants to take advantage of these markets, which is why they are increasing the concentration of their resources in the Brazilian and Chinese market.

In 2008 we had one of the worse recessions that hit the entire world hard. Millions of people lost their jobs, not only in America but everywhere. Europe is having financial crisis right now. Japan is another example. In America the housing bubble and the fall of the financial industries had an impact on everyone. Since they lost jobs they started to move closer to work so they don’t have to drive. The cost of the car industry got affected by it.
Poverty, handicaps, age and gender are all factors which influence the variability of mobility gaps. Therefore, people with low incomes make fewer trips, which incidentally restrict their access to jobs and other services. People suffering from physical handicaps are further limited in function of the severity of their handicap. Source: adapted from D. Jacoby (2008) "How should the global financial crisis affect your freight strategy?", Logistics Digest, December. http://www.bostonstrategies.com/images/BLD_0812.pdf
Impact of Recessions on Consumption and Freight Rates
Recessions can have various levels of severity, ranging from light where economic decline (e.g. GDP) may last a short period of time to severe where economic decline is steep and may last several years (commonly a depression). This severity will imply various levels of decline in consumption, trade and freight rates:
• Consumption. The level of impact on consumption is related to the price of goods. Basic goods (e.g. food) and luxury goods tend to be the most resilient, so their respective supply chains tend to be impacted marginally by recessions. However, it is over durable goods (e.g. cars), discretionary goods (e.g. electronics) and capital equipment (e.g. ships and port infrastructure), that recessionary forces can have significant impacts in lowering their respective consumption. Example of diff countries
• Trade and freight rates. Stock market valuations and freight rates (futures indexes) tend to be leading forces in the decline of international trade, followed by production, income, spending and container volumes. Example of different countries
What is notable for the correction that began in 2008 is the extreme rapidity at which the sequence unfolded, implying that while future (forward looking) indexes first collapsed, so did container volumes and global trade immediately afterwards, confirming the inevitability of the collapse of the material economy and the temporary and for some freight segments the permanent disappearance of substantial portions of merchandise volume. All of this is indicative of a global economy that is increasingly integrated.
Air Transportation/Cargo: The slump in global air cargo has more than doubled, the airline industry's leading trade body has warned, in a bleak harbinger for the world economy that indicates weak consumer spending in the US and Europe is hitting demand for high-value exports from Asian manufacturers. The International Air Transport Association (IATA) indicated that the air-freight market declined by 3.8% in August compared with the same period last year, accelerating a trend that saw a 1.8% falls in July.
Asia represents nearly half of the freight market and it saw a fall of 5.4% in August. The major carriers in the region were experiencing a slowdown in cargo. Their cargo numbers are driven by consumption in Europe and North America, so if their numbers are weak it is because people in Europe and North America are not buying products.
According to The International Air Transport Association estimates, airline industry profits will slip from nearly $7bn in 2011 to less than $5bn in 2012.
Demand for air cargo transport rebounded sharply in 2010 after a calamitous 18-month decline that began in May 2008. In spite of this downturn, world air cargo traffic will triple over the next 20 years, compared to 2009 levels, averaging 5.9% annual growth. The number of airplanes in the freighter fleet will increase by more than two-thirds over the same period. In 2009, world air cargo traffic declined 11.3%, after declining 1.8% in 2008 and growing 3.3% in 2007. The 2008–2009 periods marked the first time that air cargo traffic has contracted in two consecutive years. The decline affected nearly all geographic markets, but markets connected to industrial freight flows generally fared worse than markets less dependent on these flows. The rising price of fuel diverted air cargo to less expensive road transport and maritime modes beginning in 2005. Although the tepid rate of world air cargo traffic growth between 2005 and 2008 can be attributed in part to rising fuel prices, the nearly 13% drop in cargo traffic during the two years ending in 2009 reflects the steep plunge in industrial activity attendant to the global economic downturn.
The global economic downturn that began in the latter half of 2008 was the worst contraction since the Great Depression. World industrial production fell 9% in 2009, which produced the worst decline in freight transport in 80 years. Economic and industrial disruptions led to a drop in traffic for all freight transport modes—container-handling statistics for world ports also fell approximately 9% in 2009. For the first time ever, containership lines cut services, reduced frequencies at ports of call, and idled ships on a global scale. In August 2009, industrial activity began to recover, particularly in Asia. The pace of air cargo traffic contraction, which had approached 30% in the first half of 2009, began to ease. Monthly air cargo traffic statistics turned positive in November 2009, and the first eight months of 2010 saw an estimated 24% growth in traffic, compared to the same period in 2009. The strong rebound is expected to propel world air cargo traffic to regain the peak it attained min 2007 by the end of 2010. Anecdotal evidence suggests that many industrial shippers have turned to air cargo in response to the overcorrection that constrained capacity in the other modes of transport, particularly in containerships.

http://www.boeing.com/commercial/cargo/01_05.html
Just an example of the recession years 2008-2009 Effects on North America’s Cargo: Air cargo traffic declined sharply in 2009 Air cargo moving to, from, and within the United States and Canada accounts for 11.2% of the world’s air cargo traffic in terms of tons-kilometers and 16.3% in terms of tonnage. The global economic downturn had a severe effect on the North American cargo market, which declined 9.7% in 2008 and fell a further 12.6% in 2009. US domestic air cargo, which accounts for 95.9% of the North American market, decreased 9.7% in 2008 and decreased a further 12.4% in 2009. Canada’s domestic air cargo traffic has been revised downward from previous editions of this publication for the years 2000–2007, based on a review of the Canadian domestic air cargo data. Canada’s domestic air cargo, which is 2% of the total North American market, declined 10.5% in 2008 and 9.4% in 2009. Trans border traffic northbound from the United States to Canada accounts for 1.4% of the 2007 North American market. Trans border traffic southbound from Canada to the United States accounts for 0.3% of the North American market. It appears that an economic recovery has begun, resulting in a strong surge in North America’s air cargo traffic. In the first seven months of 2010, North America air traffic grew 6.0% compared to the corresponding period of 2009.
Effects on South Asia’s Cargo: South Asia air cargo flow exceeds 1.7 million tons per year The South Asia market constitutes approximately 5.0% of the world’s air cargo traffic in tonnage and 5.3% in tons-kilometers. Global economic downturn affected South Asia air cargo flows unevenly Total international air cargo flows into, within, and out of South Asia were nearly 1.73 million tons in 2009, down from 1.76 million tons in 2007. Historically, Europe has been South Asia’s leading trade partner. But because the global economic downturn affected the various regions unevenly, the relative market share of the region’s trade partners changed for the 2008-to-2009 period. While South Asia air trade with most regions declined in 2008 and 2009, air cargo between South Asia and the Middle East increased from 476,000 tons in 2007 to 500,000 tons in 2009. This boosted the Middle East share of the region’s air cargo traffic to 29%, up from 27% in 2007, making the Middle East the region’s largest trade partner in 2009. Europe’s share dropped to 24% in 2009 from 27% in 2007. Asia’s and North America’s shares remained very close to the 2007 levels, at 26% and 16%, respectively. The shares of the regions accounting for the remaining 5% of South Asia air trade also remained the same as in 2007. Intraregional air trade among the eight nations of the region is estimated to have totaled about 52,000 tons in 2009. However, a large volume of European, Asian, North American, and intraregional air trade is transshipped through the Persian Gulf (either by air or by sea and air). Transshipment can blur the true origin of many regional air cargo flows. Although Europe has been South Asia’s leading air trade partner, trade volume with Asia was rising prior to 2007. In 2007 and 2008, trade between South Asia and Asia was flat at 460,000 tons each year. In 2009 air trade with Asia fell to 450,000 tons. As the global economy recovers, it is expected that previous trade relationships will be restored.

http://people.hofstra.edu/geotrans/eng/ch6en/conc6en/carlandarea.html http://www.guardian.co.uk/business/2011/oct/03/air-freight-decline-headaches-airlines http://www.boeing.com/commercial/cargo/01_05.html