Air cargo analysts see a slightly brighter picture
IATA emphasized that, despite the improvements, profitability at these levels is still exceptionally weak
in the NewsState of Logistics 2016: Pursue mutual benefit North Texas WERCouncil to hold 15th Annual Warehousing Resource Convention Manufacturer simplifies complexity with collaborative robot Truckload and intermodal pricing declines remain in effect for July, says Cass and Avondale report UPS announces efficiency gains in U.S. to Canada shipping times More News
The International Air Transport Association (IATA) announced an upgrading of its industry profit expectations to $6.9 billion (up from $4.0 billion projected in June).
IATA emphasized that, despite the improvements, profitability at these levels is still exceptionally weak (1.2 percent net margin) considering the industry’s total revenues of $594 billion.
In its first look at 2012, IATA is projecting profits to fall to $4.9 billion on revenues of $632 billion for a net margin of just 0.8 percent.
“Airlines are going to make a little more money in 2011 than we thought. That is good news. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement,” said Tony Tyler, IATA’s Director General and CEO. “But we should keep the improvement in perspective. The $2.9 billion bottom line improvement is equal to about a half a percent of revenue. And the margin is a paltry 1.2 percent. Airlines are competing in a very tough environment. And 2012 will be even more difficult,” said Tyler.
IATA’s forecast is built around global projected GDP growth of 2.5 percent in 2011 falling to 2.4 percent in 2012. Airline financial performance is closely linked to the health of world economies. Whenever GDP growth has slowed below 2.0 percent the airline industry has lost money.
“We will be perilously close to that level at least through 2012. The industry is brittle. Any shock has the potential to put us in the red,” said Tyler.
This comes at a time when available capacity is on the decline, and new buildings are in flux. As noted in LM yesterday, the delivery of the Boeing’s latest offering has been delayed.
This does not trouble Tom Crabtree, who oversees Boeing’s cargo industry forecasting effort, however:
“Projections are highly variable, influenced by short-term factors,” he said.
IATA’s forecast of a $4.9 billion profit is based on partly on metrics indicating that cargo markets that will grow at 4.2 percent (three times the 1.4 percent growth of 2011), but with no growth in yields.
Fuel prices are expected to fall slightly based on a crude oil price of $100 per barrel (less than the $110 price expected for 2011). But due to the effects of fuel hedging delaying the benefits of lower spot prices, the fuel bill will grow to 32 percent of airline costs (up from 30 percent in 2011) with a total bill of $201 billion.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
Subscribe to Logistics Management Magazine!Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!
2016 State of Logistics: Third-party logistics 2016 State of Logistics: Ocean freight View More From this Issue