Air cargo sector challenged by nature and energy

Despite the encouraging news from The International Air Transport Association on improving freight volumes, there are still two key issues that may have a negative impact on a full recovery: the weather and fuel prices.

By ·

Despite the encouraging news from The International Air Transport Association (IATA) on improving freight volumes, there are still two key issues that may have a negative impact on a full recovery: the weather and fuel prices.

Severe weather in Europe and North America in December was a major problem, and the season so far does not appear to be improving. It is estimated that this shaved 1 percent off of total traffic demand for the month.

As a result demand dipped to 4.9 percent growth on December 2009 levels, significantly lower than the 8.2 percent growth recorded in November. Hardest hit was Europe which saw December growth slow to 3.3 percent.

But IATA says this is only half the story.

A sharp rise in oil prices, as they predicted, may mean a consecutive second year of profitability – but with industry profits falling by 40 percent to $9.1 billion.

This was based on an oil price of $84 per barrel (Brent). Fuel accounts for 27 percent of operating costs and a sustained rise in the oil price could spoil the party. With uncertainties in the Middle East, oil prices are now hovering near the $100 per barrel mark.

For every dollar increase in the average price of a barrel of oil over the year, airlines face the difficult task of recovering an additional $1.6 billion in costs.


About the Author

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 [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!

Article Topics

Air Cargo · Transportation · All Topics
Latest Whitepaper
Supply Chain Visibility: Illuminating the Path to Responsive, Agile Operations
Supply chain visibility is not an end, but a tool. It is the means to achieving true supply chain effectiveness, agility and ultimately, corporate profitability.
Download Today!
From the December 2017 Logistics Management Magazine Issue
Trade and transport analysts see rates rising across all modes in accordance with continued expansion of domestic and international markets. Economists, meanwhile, say shippers can expect revenue growth in transport verticals to remain in the 3%-plus range.
2018 Customs & Regulations Update:10 observations on the “digital trade transformation”
Moore on Pricing: Freight settlement and your TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2018 Rate Forecast
Join our panel of top oil and transportation analysts for an exclusive look at where rates are headed and the issues driving those rate increases over the coming year.
Register Today!
EDITORS' PICKS
2018 Rate Outlook: Economic Expansion, Pushing Rates Skyward
Trade and transport analysts see rates rising across all modes in accordance with continued...
Building the NextGen Supply Chain: Keeping pace with the digital economy
Peerless Media’s 2017 Virtual Summit shows how creating a data-rich ecosystem can eliminate...

2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...