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

The International Air Transport Association (IATA) announced August 2014 data for global air freight markets showing continued “robust”growth in air cargo volumes.

Even though some of its key metrics dropped sequentially from August to September, the outlook for manufacturing over all remains strong, according to the most recent edition of the Manufacturing Report on Business issued today by the Institute for Supply Management (ISM).

Company officials said that these planned changes, which will take effect on January 4, 2015, will provide for increases in current pay rates and reduce the time it takes for its nearly 15,000 drivers to reach top pay scale.

While the economy has seen more than its fair share of ups and downs in recent years, 2014 is different in that it could be the best year from an economic output perspective in the last several years. That outlook was offered up by Rosalyn Wilson, senior business analyst at Parsons, and author of the Council of Supply Chain Management Professionals (CSCMP) Annual State of Logistics Report at last week’s CSCMP Annual Conference in San Antonio.

Matching last week, the average price per gallon of diesel gasoline dropped 2.3 cents, bringing the average price per gallon to $3.755 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).

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