IATA revises air cargo forecast for 2012

While Boeing is forecasting a long-term surge in air cargo demand, a more sobering view was expressed by The International Air Transport Association (IATA) yesterday.

The immediate short-term outlook is so dim, in fact, that IATA announced revisions to its industry forecast.

Spokesmen said profitability remains weak but unchanged at $6.9 billion for a net margin of 1.2 percent this year. Looking ahead to 2012, IATA downgraded its central forecast for airline profits from $4.9 billion to $3.5 billion for a net margin of 0.6 percent.

This is in marked contrast to the recent bullish news coming from one of the world’s largest aircraft manufacturers.

“World air cargo traffic will triple over the next 20 years, according to Jim Edgar, regional director of Cargo Marketing for Boeing. “And cargo rates should mirror demand.”

“From now through 2029, we expect world air cargo traffic to grow at an annual rate of 5.9 percent,” Edgar says. “Asia will continue to be at the forefront of the air cargo industry. Routes associated with Asia will continue to experience the world’s highest growth rates over the next 20 years, at 6.8 percent.”

But IATA maintained that the Eurozone crisis puts severe downside risk on the 2012 outlook as illustrated by the recently published OECD economic outlook. In a worst case scenario, should the Eurozone crisis evolve into a full-blown banking crises and European recession, IATA estimates that the global aviation industry could suffer losses exceeding $8 billion in 2012.

“The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis. Such an outcome could lead to losses of over $8 billion—the largest since the 2008 financial crisis,” said Tony Tyler, IATA’s Director General and CEO.

For the remainder of this year, Tyler was equally circumspect:

“The global forecast for 2011 is unchanged at $6.9 billion. But regional differences have widened, reflecting the very different economic environments facing airlines in different parts of the world. And the overall margin of 1.2 percent tells you just how difficult the battle for profitability in this business is.”