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Air cargo in the doldrums

By Staff Reports on June 2, 2014
tagged iata, tony tyler, doha

Tony Tyler of IATA speaks at the association's 70th Annual General Meeting.

In contrast to robust growth in passenger traffic, air cargo has been in the doldrums since 2010, according to the International Air Transport Association’s Economic Performance of the Airline Industry report.

IATA launched this report during its 70th Annual General Meeting in Doha, Qatar. The report outlines how air transport is adding value for consumers, the wider economy, governments and investors.

“Aviation is a catalyst for economic growth. Airline revenues now total 1 percent of global GDP and the industry will safely transport 3.3 billion people and $6.8 trillion worth of goods this year,” Tony Tyler, IATA’s director general and CEO, said.

Global spending on air transport is expected to reach US$746 billion (548 billion euros) in 2014, which equals 1 percent of world GDP.

Employment supported by aviation has reached some 58 million jobs worldwide. In addition, airlines are making enormous investments in modernizing fleets. This year, the industry will take delivery of 1,400 aircraft.

The soft air cargo market is mainly the result of the unusual weakness of world trade that is related to a parallel trend of companies on-shoring production.

Nonetheless, the strongest demand since 2010 is expected with a weaker-than-normal cyclical upturn estimated to produce 3.1 percent growth. But real freight rates are expected to fall 4 percent this year.

The divergence in growth trends between weak cargo and robust passenger is creating challenges for airlines in matching capacity to demand. Capacity added to meet passenger demand brings in cargo capacity as well.

The industry continues to pursue process improvements to improve competitiveness. To boost competitiveness and revitalize trade growth, in addition to the E-freight initiative, the industry is working toward a goal of reducing shipping times by 48 hours before 2020 from the average of 6.5 days.

Fuel costs are stable, but they have never before been so high for so long. Since 2011, average jet fuel costs have remained above US$120 (88.18 euros) per barrel and the expectation for this year is for an average jet fuel cost of US$124.2 (91.26 euros) per barrel. The total industry fuel bill is expected to reach US$212 billion (155 billion euros). Investments in fuel-efficient aircraft are among the drivers of a 1.7 percent improvement in fuel efficiency.

“It’s great that we are able to celebrate the industry’s centennial with the industry in the black,” Tyler said. “Making ends meet for airlines has always been a challenge. There is lots of evidence that the hard work of the industry to structure itself for profitability is beginning to pay off. We are increasing profitability even with jet fuel prices above $120 per barrel. For the first time, the global load factor looks like it will average over 80 percent for the year. And fuel efficiency continues to rise. But there are strong headwinds from rising infrastructure costs, inefficiencies in air traffic management, a heavy tax burden and costly regulation.”