Subscribe to our free, weekly email newsletter!


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.
By Patrick Burnson, Executive Editor
April 28, 2011

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 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

XPO Logistics announced second quarter earnings and the acquisition of two companies, New Breed Logistics, a non asset-based 3PL focusing in contract logistics services, for roughly $615 million, and Atlantic Central Logistics, a 3PL provider of last-mile logistics services, for roughly $36.5 million.

The report, entitled “Outlook for the Domestic Transport and Logistics Market in 2H14 and Beyond,” takes the view that strong freight levels in the second quarter have left trucking companies in a good position: one in which they need to come up with new plans to handle rising demand. But even with that positive momentum afloat, the report observes that there are some familiar challenges intact, such as a lack of qualified drivers and the regulatory drag from the new hours-of-service rules that took effect in July 2013.

Flags of Convenience are a fact of life in the commercial maritime trade, but several European political action groups are worried that they will pose a threat to the Continent’s air cargo industry.

For May, which is the most recent month for which data is available, the SCI is -7.5, following April’s -7.5. FTR said this reading represents a still-tight capacity environment, as utilization rates hover between 98 percent and 99 percent.

With a 1.1 cent drop to $3.858 per gallon, this follows declines of 2.5 cents, 1.9 cents, and 0.7 cents over the previous three weeks, with the cumulative four-week decline at 6.2 cents.

Article Topics

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

Comments

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


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA