Pacific Rim logistics managers may opt for air

Asian airlines are expected to remain at the forefront in promoting further development of the global airline industry, with continued investments in fleet expansion and customer service innovation

By ·

If the moribund air cargo industry is to finally stage a turnaround, the Pacific Rim will play a major role.

Preliminary financial performance figures released in June by the Association of Asia Pacific Airlines (AAPA) showed that Asia Pacific airlines achieved $5.2 billion in combined net profits in 2012, 6.7% above the $4.8 billion reported for the year 2011.

Nonetheless, carriers face a challenging operating environment marked by prolonged weakness in air cargo markets and persistently high jet fuel prices.

Operating expenses totaled $166.5 billion, 7.0% more than the $155.7 billion recorded in the previous year. The main cause of the increase was a 12.2% jump in fuel expenditure to $58.8 billion, with jet fuel prices averaging $128 per barrel in 2012. The share of fuel expenditure as a percentage of total operating costs rose to 35.3% in 2012, from 33.7% the previous year. Non-fuel expenditures grew by 4.3% to $107.7 billion.

“Prudent capacity management maintained relatively high load factors, helping to offset the impact of persistently high fuel prices and an extended period of weak demand in the global air cargo market,” says Andrew Herdman, AAPA Director General.

“Asian airlines are expected to remain at the forefront in promoting further development of the global airline industry, with continued investments in fleet expansion and customer service innovation,” he adds.

Analysts at the International Association of Air Transport (IATA), concur, noting that Asia-Pacific airlines are expected to post a combined profit of $4.6 billion in 2013 (up from the previous projection of $4.2 billion).

It will lead all regions both in terms of absolute profits and earnings before interest and taxes (EBIT) margin (5.0%).

The main driver is strong growth in China and long haul markets, supported by buoyant trade flows and other business activities. Stronger growth is also expected from Japan as market-stimulating measures take effect in the region’s second largest economy. This is helping to overcome weakness in cargo markets in which Asia-Pacific airlines are the major players with a 38% market share.

The chances that U.S. shippers will put their cargo – even high-end perishables and pharma – on Asia Pacific aircraft rather than container vessels seems ever more remote in the coming months, say other industry insiders.

But Brandon Fried, executive director of the Airforwarders Association (AfA), provides a longer-term perspective on the issue.

“Most heavy shipments of any significant weight and volume use ocean carriers despite slower transit times and varying environmental factors,” he says. “However, for those consignments with time constraints, higher value and a need for tight inventory or temperature control, airfreight brings more value.”

Indeed, as global economic challenges persist, AfA has seen some additional cargo move from the maritime leg of the transit to air carrier to cut transit time and reduce cost.

Finally, there’s this.

Boeing projects a demand for more than 35,000 new airplanes over the next 20 years, valued at $4.8 trillion. The company released its annual Current Market Outlook last month at the Paris Air Show, forecasting the world fleet to double over the next two decades – with the Asia Pacific leading the way.


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!

Latest Whitepaper
Six Ways Cloud ERP Supports Rapid Innovation
Kenandy is a new approach to ERP that lets you and your team focus on driving innovation, creating new product lines, and expanding your customer base even as you improve your business operations.
Download Today!
From the November 2016 Issue
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL) provider that could successfully combine transportation services and technology capabilities under one roof.
Warehouse & DC Operations Survey: Ready to confront complexity
2016 Quest for Quality Awards Dinner
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Best Practices: How to Efficiently Leverage APIs to Increase Your Net Income
Both legacy and modern technology leaders agree that leveraging API connectivity is critical in keeping up with the pace of a world that demands not only speed and agility, but also a deep level of visibility. During this session a panel of technology and industry experts discuss impact APIs can have on annual net income and market capitalization.
Register Today!
EDITORS' PICKS
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....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...