This year’s cargo market has been hit harder than International Air Transport Association executives originally projected, with weak airfreight volumes out of the Asia-Pacific cutting into the industry’s profitability. It’s been so bad, in fact, that IATA officials have lowered their growth projection for 2011 from 5.5 percent to 1.4 percent.
What’s more, carriers are only expected to transport 46.4 million tonnes of freight in 2011, a total 1.8 million tonnes less than IATA officials previously estimated. Cargo volumes, which peaked in May 2010, have been affected by a 39-percent, year-over-year, surge in fuel prices and weak supply chains.
And the situation doesn’t seem to be improving, according to IATA officials. In fact, they say, an airfreight revival isn’t likely to occur before the end of the year.
The problem is multifaceted. Although the Asia-Pacific airfreight sector has the highest market share and profit ratio, the region hasn’t been able to offset the losses from the March tsunami and earthquake in Japan. Asia-Pacific passenger and freight carriers, which are projected to profit $2.5 billion in 2011, can’t compete with the $8 billion profit they experienced last year.
Not all regional airlines have posted low numbers this year, however. Latin American freight carriers, propelled by the growth of commodity exports to North American and China, are projected to profit $600 million in 2011. This a whopping $500 million more than IATA estimated in June.
It’s a bright spot in a tough economic situation, IATA officials contend, leading the organization to raise 2011′s industry profit forecast from $4 billion to $6.9 billion.
“Airlines are going to make a little more money in 2011 than we thought,” IATA Director General and CEO Tony Tyler said in a statement. “That is good news. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement. But we should keep the improvement in perspective.”
After all, Tyler explained, an improvement of $2.9 billion only translates to a half a percent of profit. “And the margin is a paltry 1.2 percent,” he said. “Airlines are competing in a very tough environment. And 2012 will be even more difficult.”
Still, cargo markets should see some improvement next year. IATA officials expect the worldwide airfreight sector to grow 4.2 percent in 2012, although yield is expected to remain sluggish.
Nevertheless, Tyler pointed to the small achievements being made in the aviation industry while encouraging authorities to promote policies that sustain growth. “Every plane that takes off is a catalyst for economic growth and prosperity,” he said in a statement. “Governments must carefully evaluate the negative impact of the current high levels of taxation, absolutely resist increases or new taxes, and develop policies that support aviation’s growth with efficient infrastructure.”