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IATA issues positive statement on air cargo growth

The rising price of oil, and continued unrest in the Middle East remains a concern for U.S. air cargo executives, however
By Patrick Burnson, Executive Editor
March 01, 2011

The International Air Transport Association (IATA) announced international scheduled traffic results for January showing a 9.1 percent growth in air freight compared to January 2010.

“We begin the year with some good news. January traffic volumes are up—8.2 percent on January 2010 and 2.6 percent on December. With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects,” said Giovanni Bisignani, IATA’s Director General and CEO.

He added – predictably – that industry leaders are closely tracking events in the Middle East.

“The region’s instability has sent oil prices skyrocketing,” he said. “Our current forecast is based on an average annual oil price of $84 per barrel (Brent). Today the price is over $100. For each dollar it increases, the industry is challenged to recover $1.6 billion in additional costs. With $598 billion in revenues, $9.1 billion in profits and a profit margin of just 1.5 percent, even with good news on traffic 2011 is starting out as a very challenging year for airlines.”

This concern was shared by U.S. air cargo executives, who told LM that they are keeping a watchful eye on the situation.

“Fuel is our second largest expense behind salaries, wages, and benefits,” said Matt Buckley, Southwest Airline’s senior director, cargo and charters. “Rising fuel costs have a significant impact on our bottom line, and thus will ultimately result in increased shipping costs.”

Robbie Anderson, president, United Cargo, told LM that fuel is United’s largest expense at 26.6 percent and, as a result, is a constant focus for efficiency.

“The rising drumbeat of fuel prices created an increase of $517 million in United’s fuel costs in the fourth quarter alone,” he said. “Consider that each run up of 1 dollar in the price of crude carries a $100 million incremental cost to United. That is pretty startling.”

And according to IATA, the timing for such a complication is ill-timed. Air freight in January was 39 percent above the low point reached at the end of 2009 and some 6 percent above the pre-recession peak of early 2008. Freight has, however, fallen 2 percent since its May 2010 peak at the height of the re-stocking bubble.

For more stories on Air Cargo click here.

About the Author

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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).


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