Asia-Pacific is key to air cargo recovery

While the International Air Transport Association further downgraded its 2011 airline industry profit forecast to $4 billion, Asia-Pacific carriers are expected to earn $2.1 billion—the most profitable of all regions.

By ·

While the International Air Transport Association (IATA) further downgraded its 2011 airline industry profit forecast to $4 billion, Asia-Pacific carriers are expected to earn $2.1 billion—the most profitable of all regions.

But even here, there were some warnings issued by analysts, who note that it is dramatically down from the $10 billion profit that the region achieved in 2010.

Airlines in this region are more exposed than others to cargo markets and fuel price fluctuations, IATA said.

Asia-Pacific airlines carry 40 percent of all air freight volumes, while low labor costs and relatively low hedging means fuel accounts for a bigger proportion of total costs. In addition, the Japanese earthquake and tsunami are expected to dent the region’s prospects for the remainder of the year.

However, this will be more than offset by robust growth in both China and India. The continued dynamism of these economies means that Asia-Pacific is the only region where demand increases (6.4 percent) are expected to outpace capacity growth (5.9 percent).

The key risk in this region to this outlook is a weakening of global economic growth. High energy prices will certainly have a slowing impact on economic expansion, economists agree.

IATA said the impact will be mitigated by two factors. First, while high oil prices previously triggered recessions, today’s economies (which generate a unit of GDP using just half the energy required in the mid-1970s) are less sensitive. Second, the corporate sector is cash-rich, business confidence is high, and world trade continues to expand at around 9 percent annually.

The International Monetary Fund and others have raised global growth projections, which would indicate a recovery in demand growth to the historical 5.6 percent level for the second half of 2011. IATA’s forecast for continued, albeit lower, airline profits despite $110 a barrel oil prices, is dependant on a strong economy to generate sufficient revenues to partially offset higher fuel costs.

For related articles click here.


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 · Air Freight · Global Trade · All Topics
Latest Whitepaper
Lead your organization through the driver shortage and over-the-road regulations.
Potential transportation disruptions are looming as increased over-the-road regulations are set to go into effect in 2017. Experts believe these regulations will further impact the already challenged driver pool as well as reduce driver productivity.
Download Today!
From the January 2017 Issue
Following LM tradition, we start off the New Year with our annual “Rate Outlook” cover story and subsequent Webcast
Moore on Pricing: The other TMS functional options
2017 Rate Outlook: Where are freight transportation rates headed?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2017 Rate Outlook: Where are freight transportation rates headed?
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
2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...

Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...
Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....