Subscribe to our free, weekly email newsletter!


State of Logistics: Air

By Patrick Burnson, Executive Editor
July 01, 2013

In the air sector, the numbers tell the story. The International Air Transport Association (IATA) recently upgraded its global outlook for the airline industry to a $12.7 billion profit in 2013 on $711 billion in revenues. That rings in $2.1 billion better than the $10.6 billion profit projected in March of this year and an improvement on the $7.6 billion profit generated in 2012.

However, margins remain weak. On revenues that are expected to total $711 billion this year, the net profit margin is expected to be 1.8%. Indicative of the characteristically razor thin profits of the airline industry, even this small margin will make 2013 the third strongest year for airlines since the events of 2001. In 2007, the industry earned 2.9 percent net profit margin ($14.7 billion), and in 2010 airlines generated a 3.3 percent net profit margin ($19.2 billion).

“This is a very tough business,” says Tony Tyler, IATA’s director general and CEO. “The day-to-day challenges of keeping revenues ahead of costs remain monumental.”

Profitability is thin, but there’s a solid performance improvement story over the last seven to eight years, with a more efficient use of assets as the main contributor. In fact, the industry load factor is expected to average a record high of 80.3 percent in 2013—6.0 percentage points above 2006 levels.

Macroeconomic factors have also contributed. Oil prices are expected to average $108 per barrel, a little below the $111.8 average for 2012 in part due to increasing supply from North America. Meanwhile, the outlook for global economic growth has deteriorated slightly since March as the recession in Europe proves to be deeper than expected. The beneficial impact of lower fuel prices is expected to offset the adverse effect of weaker economic growth, providing a moderate boost to industry profitability.

The air cargo business continues to suffer the brunt of the impact of the weak outlook in developed economies. Freight volumes are expected to be basically stagnant at 52.1 million tons, and there has been no significant growth since 2010 when freight volumes were 50.7 million tons.

About the Author

image
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).


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!

Recent Entries

Over $2 billion dollars in carrier overcharges go uncollected each year as shippers do not have the time or resources to collect refunds.

Last year at this time, retailers were relieved to learn that a tentative agreement on a new labor contract had been reached by dockside labor and management on the U.S. East and Gulf coasts. But not without considerable blood on the floor.

The National Retail Federation is encouraging maritime management and the union representing dockworkers along the U.S. West Coast ports to expedite pending contract negotiations and reach agreement on a new deal well in advance of the expiration of the current contract this summer.

SAP AG announced the availability of a new application to help centralize processing trade activities, SAP Global Trade Services, processing trade in China. 



Did you know that Supplier Portals can help companies reduce risk, improve compliance and enhance product availability? Download Amber Road's latest research report featuring research from Gartner.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA