Air cargo forecast dips in first quarter
The bulk of respondents now expect the level of profitability to fall this year, driven largely by a significant increase in fuel costs.
in the NewsDigital Issue: The Current State of Third-Party Logistics Services New JDA survey finds missing link to omni-channel success for manufacturers and retailers FTR report makes the case for Twin 33-foot trailers in the LTL sector A3 fall conferences to offer insight into latest automation, strategies and networking Some shipping sectors still slow to recognize advances in ocean cargo technology More News
Results from the International Air Transport Association’s (IATA) quarterly survey conducted in April point to a significant deterioration in sentiment on the outlook for industry profitability in 2011. The bulk of respondents now expect the level of profitability to fall this year, driven largely by a significant increase in fuel costs.
The extent of improvement in reported profitability also moderated during the first quarter of 2011. While 55 percent of respondents reported improved profitability during Q1 2011, almost a third reported poorer results. In March IATA revised down its forecast for 2011 industry profits to $8.6 billion, a fall of almost half from the estimated $16 billion profits achieved in 2010.
Richard Thompson, executive vice president, global supply chain practice for Jones Lang LaSalle in Chicago, told LM that this should come as no surprise.
“As one of four major modes of transport, air cargo is the most costly,” he said.
“Expectations about prospects for profitability over the year ahead fell significantly in our April survey, largely as a result of the sharp rise in jet fuel costs seen in the first quarter of 2011” said IATA spokesmen. “More than half of respondents now expect reduced profitability over the next 12 months. The extent of improvement in reported profitability also moderated significantly during the last quarter.”
The balance of respondents on the outlook for profitability over the year ahead fell below the 50 “no-change” mark – to 32.3 indicating reduced profitability – for the first time since mid-2009. Although traffic volumes are expect to grow further, more challenging demand-supply conditions – as capacity and competition increase on key routes – will tend to soften yield and revenue growth. At the same time input costs are expected to rise, driven primarily by rising fuel costs.
IATA said that these factors will put downward pressure on profits. It should be noted that that this does not necessarily mean a return to losses.
“It does look likely, however, that the industry in 2011 will see a fall from the level of profitability seen last year,” IATA spokesmen said.
For related articles click here.
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!
2017 Rail/Intermodal Roundtable: Volume stable, business steady Cross-Border Logistics: NAFTA tune-up time View More From this Issue