IATA braces for change

As the International Air Cargo Association (IATA) readies itself for the Annual General Meeting in Beijing next week, analysts will be able to examine one of the few bright spots in global aviation. Major infrastructure developments are supporting China’s robust traffic growth, while airlines operating in most other areas of the world are struggling to maintain cargo service levels.

According to IATA, the world’s airlines are expected to make an aggregate profit of $3.0 billion in 2012 on $633 billion in revenues. That 0.5 percent net profit margin continues to make the airline industry vulnerable to external shocks.

“A European financial meltdown appears to have been averted for the time being but it has been replaced with other risks to profitability,” said IATA’s Director General and CEO Tony Tyler. “The industry continues to deal with a host of constant challenges including improving safety, environmental sustainability, and cost-efficiency.”

Eurostat confirmed that the Eurozone escaped technically moving into recession by the skin of its teeth as GDP was flat quarter-on-quarter in the first quarter of 2012 after contracting 0.3 percent quarter-on-quarter in the fourth quarter of 2011.

“However, this does not mask the fact that the Eurozone is exhibiting recessionary tendencies in most respects,” said IHS Global Insight Chief European and UK Economist Howard Archer.
“Indeed, Eurozone GDP was down 0.1 percent year-on-year in the first quarter.”

Meanwhile, some of the world’s most successful cargo airlines are reporting the EU’s crisis has been pulling them down.

In an interview with Dow Jones News, Tim Clark, President of Emirates airline, said international airlines face a “perfect storm” from high fuel costs, a slowing global economy and volatile exchange rates that could see many carriers forced to downsize.

“The euro is going south, the pound is going south, fuel costs are still too high,” Clark said.