IATA's outlook bleak despite strong Asia-Pacific performance
Attendees of the International Air Transport Association’s (IATA) 67th Annual General Meeting in Singapore received some dismal news during the conference: The association reduced its 2011 aviation profit forecast by a staggering 54 percent. Sky-high fuel prices, political unrest in the Middle East and North Africa, and an abundance of natural disasters are to blame.
Outgoing IATA Director General and CEO Giovanni Bisignani believes these recent events have created the perfect storm for the aviation sector. Projected industry profits for 2011, he said, have shrunk to $4 billion. “That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance,” he said during the organization's annual general meeting in Singapore.
Take capacity, for instance. Although passenger and freight capacity are both projected to grow 5.8 percent this year, the gap between supply and demand has increased considerably – 0.8 percent higher than the previous forecast. “This decline in asset utilization, represented by lower load factors and average hours flown per aircraft, is the most significant downward pressure on airline profitability,” an IATA spokesman stated in a news release.
Still, cargo has a slight edge over passenger traffic. While passenger demand is projected to increase by 4.4 percent in 2011 – 1.2 percent lower than March estimates – airfreight demand is expected to grow 5.5 percent, only 0.6 percent lower than March projections.
Of all regions, Asia-Pacific is expected to post the highest growth in 2011. To Bisignani, this success is attributable to a number of factors, namely Asia’s 40 percent market share in the airfreight industry. “Asia has policies to promote and support growth,” he told members of IATA.
And the region has no plans to slow down. China, for instance, has built 45 new airports since 2006 and plans to construct 52 more by 2020, Bisignani said. In light of this fact, he foresees Asia-Pacific overtaking both Europe and North America as the global aviation hotspot in the years to come.
“In place of our traditional leaders, I am convinced that China and India will soon become the driving force of aviation in this century,” Bisignani remarked. “They will grow aviation stronger through change, replacing artificial barriers with commercial opportunities.”