Air cargo forecast dips in first quarter

The bulk of respondents now expect the level of profitability to fall this year, driven largely by a significant increase in fuel costs.
By Patrick Burnson, Executive Editor
April 28, 2011 - LM Editorial

Results from the International Air Transport Association’s (IATA) quarterly survey conducted in April point to a significant deterioration in sentiment on the outlook for industry profitability in 2011. The bulk of respondents now expect the level of profitability to fall this year, driven largely by a significant increase in fuel costs.

The extent of improvement in reported profitability also moderated during the first quarter of 2011. While 55 percent of respondents reported improved profitability during Q1 2011, almost a third reported poorer results. In March IATA revised down its forecast for 2011 industry profits to $8.6 billion, a fall of almost half from the estimated $16 billion profits achieved in 2010.

Richard Thompson, executive vice president, global supply chain practice for Jones Lang LaSalle in Chicago, told LM that this should come as no surprise.

“As one of four major modes of transport, air cargo is the most costly,” he said.

“Expectations about prospects for profitability over the year ahead fell significantly in our April survey, largely as a result of the sharp rise in jet fuel costs seen in the first quarter of 2011” said IATA spokesmen. “More than half of respondents now expect reduced profitability over the next 12 months. The extent of improvement in reported profitability also moderated significantly during the last quarter.”


The balance of respondents on the outlook for profitability over the year ahead fell below the 50 “no-change” mark – to 32.3 indicating reduced profitability – for the first time since mid-2009. Although traffic volumes are expect to grow further, more challenging demand-supply conditions – as capacity and competition increase on key routes – will tend to soften yield and revenue growth. At the same time input costs are expected to rise, driven primarily by rising fuel costs.

IATA said that these factors will put downward pressure on profits. It should be noted that that this does not necessarily mean a return to losses.

“It does look likely, however, that the industry in 2011 will see a fall from the level of profitability seen last year,” IATA spokesmen said.

For related articles click here.



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

Total gross first quarter revenue for XPO was up 404.4 percent annually to $3.5 billion, with net revenue up 510.5 percent to $1.6 billion. While gross and net revenue were up, the company reported a net loss of $23.2 million, or $0.21 per diluted share and an adjusted net loss attributable to common shareholders of $9.3 million or $0.08 per share.

Regardless of capacity, pricing, or the economy, trucking industry regulations are never far from the freight transportation limelight. That is especially evident when it comes to the federally mandated hours-of-service (HOS) regulations. As usual, the current state of HOS remains somewhat fluid. And the reason for that has to do with legislation coming from the Senate Transportation Appropriations legislation that is currently being considered by the Senate.

At last week’s NASSTRAC Conference in Orlando, Fla., LM Group News Editor Jeff Berman caught up with Jack Holmes, president of UPS Freight, the less-than-truckload subsidiary of UPS. On June 30, Holmes will retire from UPS after a 37-year career with Big Brown that saw him rise from the overnight docks in Philadelphia to the executive suite in Richmond, Va.

Having introduced into the California State Senate a new bill designed to give an exemption from sales and use tax for port terminal operators purchasing zero or “near zero-emission” equipment, Lara is trying to advance two agendas.

The notions of “green shoots” or “cautious optimism” in gauging the current state of the economy does not specifically exhibit what is really happening, when assessing how things are actually going, it seems. That was made clear by Bob Costello, chief economist at the American Trucking Associations, at last week’s NASSTRAC (National Shippers Strategic Transportation Council) Shippers Conference and Transportation Expo in Orlando, Fla. last week.

Article Topics

News · Air Cargo · Air Freight · World Trade · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

Comments

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


© Copyright 2016 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA