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 Patrick Burnson, Executive Editor
July 01, 2013 - LM Editorial

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

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 'Internet of Things' or IoT is a term that has rapidly taken center stage in business and consumer technology circles, with tremendous amounts of hype in both. Don't be distracted if some of the hypothetical consumer examples of the IoT seem far-fetched; the trend has serious implications for businesses. This complimentary whitepaper takes a look at some of the opportunities afforded by the Internet of Business Things.

Of special interest to readers of Logistics Management will be “Americas Update,” which will look into the future of the market in the Americas and assess how firms will be able to favorably position themselves to compete and win market share.

After 20 years, two congressional mandates and countless lawsuits and lobbying efforts, safety advocates and the Teamsters union still say there are too many inexperienced rookie truck drivers hitting the road without sufficient behind-the-wheel training.

Congested U.S. port terminals, harbor and over-the-road truck and driver shortages, slower trains and longer rail terminal dwell times due to increased domestic rates have not only disrupted service but also driven intermodal rates and cargo handling costs up sharply.

Southern California shippers are getting a break on container dwell expenses for the next ten days as the Port of Long Beach announced that it had added an extra three days to the time that overseas import containers can remain on the docks without charge.

Article Topics

Blogs · Air Cargo · Global Logistics · Logistics · 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 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA