Air cargo: IATA’s financial forecast far from rosy

Patrick Burnson, Executive Editor -- Logistics Management, 9/9/2008

WASHINGTON—Despite a fall-off in fuel prices recently, The International Air Transport Association (IATA) expects the global airline industry to post losses of $5.2 billion in 2008.

“The situation remains bleak,” said Giovanni Bisignani, IATA’s director general and CEO. The toxic combination of high oil prices and falling demand continues to poison the industry’s profitability.”

Fuel, said IATA, is expected to rise to 36 percent of operating costs, up from 13% in 2002.

IATA also announced industry traffic data for July, which showed a continued slowing of cargo demand by 1.9 percent compared to 2007. Asia-Pacific carriers—the largest players in the cargo market—were hit hard with a 6.5 percent decline in. As a result of the weaker economic outlook, IATA significantly revised downward its traffic forecast for domestic and international markets combined.

Air freight volumes are projected to grow just 1.8 percent. This is only half the pace of expansion seen in 2007 and is boosted by the stronger growth seen at the start of the year. Strong traffic growth allowed the industry to partly absorb the rise in fuel costs from 2003-2007. This is no longer the case.

IATA’s forecast was in line with what many air cargo middlemen in the U.S. have discovered, too.

“Our business will certainly get worse before it gets better,” said Brandon Fried, executive director of the Air Forwarders Association (AFA) in Washington.

“We are seeing softening in other economies in Asia now, and that’s a real concern, because export traffic had been one of the bright spots for us up until now,” said Fried. “One consolation now is that we are moving into our fall season, which is generally pretty good for us.”

Another “consolation,” said Fried, is that the AFA is comprised of members who help shippers move freight using other modes, too.

“We are not just booking cargo on aircraft,” he said. “We are truly multimodal.”