Subscribe to our free, weekly email newsletter!


Air cargo demand compromised by high oil prices

The International Air Transport Association announced global traffic results for March showing that total freight demand climbed 0.3 percent compared to the same month last year
By Patrick Burnson, Executive Editor
May 04, 2012

The International Air Transport Association (IATA) announced global traffic results for March showing that total freight demand climbed 0.3 percent compared to the same month last year.

Comparisons with March last year are affected by events that depressed passenger demand in 2011, including the Arab Spring, which disrupted travel in the Middle East and North Africa beginning in February 2011 and the earthquake and tsunami in Japan in March 2011 that impacted air travel across the Asia-Pacific region. IATA estimates that the year-on-year rise in air travel in March was about two percentage points higher than it would otherwise have been in the absence of these events.

Cargo demand, meanwhile, was affected by the timing of the Chinese New Year, which occurred in January this year—leading to stronger February shipments—but took place in February 2011—leading to stronger March 2011 shipments and weaker year-to-year comparisons. Compared to February 2012, March air cargo demand was significantly stronger by 2.2 percent.

“If we discount the industry’s growth by two percentage points as a result of the extraordinary events in 2011, airlines still managed an expansion in the range of 5-6 percent.  But yields are not keeping pace with the continued very high price of oil,” said Tony Tyler, IATA’s Director General and CEO.

Oil prices have remained stubbornly above $100/barrel (Brent crude) for the past 14 months. In 2008, oil prices rose from $90/barrel in January to a peak of $147/barrel in late July. But by November, they had fallen back to less than $50/barrel. “We have not seen such sustained high oil prices previously. Jet fuel prices have risen 8 percent since January. Considering that fuel now accounts for 34 percent of average operating costs, it’s an increase that hurts,” said Tyler.

Meanwhile, air freight markets are now showing signs of renewed expansion. Freight Ton Kilometers (FTKs) were over 4 percent higher in March than they were in the fourth quarter of 2011. However, compared with March last year the size of the market was up just 0.3 percent. This is because the Chinese New Year occurred in February 2011, resulting in strong March 2011 shipments as factories reopened following the holiday period.

Asia-Pacific and European airlines saw their freight traffic decline 3.1 percent and 1.9 percent, respectively, compared to a year ago.

Middle Eastern carriers had a 15.1 percent rise in demand, the healthiest performance among the regions, with about four percentage points of that rise attributable to Arab Spring-related traffic suppression last year.

Latin American carriers’ traffic climbed 4.9 percent, while African carriers saw a 3.9 percent rise compared to the year-ago period. North American airlines’ demand rose 1.6 percent year-on-year.

Richard Fisher, president of the airfreight forwarding company, Falcon Global Edge in Boston, told LM that Brazil is becoming increasingly important.
“Latin America has been booming lately,” he said. “We see it as a target for growth.”

At the same time, however, both Spain and the UK have slipped into a double dip recession in recent weeks.

“The goose that lays the golden eggs can only take so many knocks before she fails to produce. Even in the best of times, increasing the cost of connectivity dents competitiveness. When the economy is weak it puts at risk aviation’s ability to create jobs and growth. And in a recession it is economic nonsense,” said Tyler.

About the Author

image
Patrick 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 .(JavaScript must be enabled to view this email address).


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!

Recent Entries

The U.S. Department of State maintained Thailand’s Tier 3 ranking, the lowest category, in its annual Trafficking in Persons (TIP) Report, which was released this week.

During this webcast we'll explore how supply chain execution convergence (SCEC) helps break down the barriers resulting from disparate, fragmented technology solutions allowing you to more effectively serve customers, adapt to changing business cycles, and save both money and resources.

Between a consumer-led revolution, competition from Amazon, international sourcing, and port shutdowns, retail supply chains are challenged like never before. A new e-book and self-assessment tool offer benchmarks and insights into how supply chains can keep up with the retail consumer.

The report, entitled “U.S. Freight Transportation Forecast to 2026, which is drafted by ATA and IHS Global Insight, calls for a 28.6 percent hike in annual freight tonnage, as well as a 74.5 percent gain in freight revenues to $152 trillion in 2026.

During this webcast experts will uncover how an industry first automated technology tool can fill the gaps in the shipment assignment processes, and optimize your transportation network for the lowest possible cost.

Article Topics

News · Air Cargo · Air Freight · Trade · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA