IATA’s air cargo forecast now less rosy

As widely anticipated, the International Air Transport Association (IATA) announced a cut in its forecast for airline industry profits (net post-tax) in 2011.

Spokesmen for the association had told LM that such a reduction was likely, although specific numbers would not be shared until this week. In its most recent report, IATA said profits will drop from $9.1 billion to $8.6 billion – a 46 percent reduction from the $16 billion of profit they estimated the industry generated last year.

“This downgrade is due to the recent surge in oil and jet kerosene prices. In line with market forecasts we now assume an average crude oil price of $96 a barrel this year, significantly up on our previous forecast of $84 a barrel, the report stated.

IATA said that the reduction in profitability would have been much greater were it not for upward revisions to economic growth this year together with relatively stable and high load factors:

“When economies are strong higher yields make it possible for airlines to limit the profitability damage from high oil prices. Clearly the risk to this outlook is that should economies weaken, under pressure from commodity prices and debt, airline profits could weaken much faster than we portray here.”

One bright spot in all of this, however, continues to be on the Pacific rim. January freight carried by Asia-Pacific carriers showed a 6.4 percent year-on-year increase. While this growth is slightly lower than the 7.2 percent reported for December 2010, the volume of freight carried by airlines based in the region actually increased by 2 percent during January alone. The growth in January takes the volume of air freight carried to 6 percent above the pre-recession peak level and 48 percent higher than the recession trough.

Matt Buckley, senior director, cargo and charters for Southwest Airlines, told LM that this came as no surprise:

“Considering the tremendous amount of manufacturing being done throughout parts of Asia, and the volume of those goods being imported to the U.S., Asia will continue to be a strategic focus for many of our shippers for years to come.”

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