IATA today reduced its growth forecast for world air cargo this year and predicted airlineprofits could tumble dramatically due to higher fuel costs, natural disasters and political
unrest.The international airline association said it now expects cargo demand to grow by 5.5%, and notby 6.1%, in 2011 due to the impact of rising fuel costs. Passenger growth was downgraded from 5.6%to 4.4%.
But IATA was more optimistic about cargo yields, noting that “robust economic conditions” havegiven airlines some scope to partially recover higher fuel prices. Cargo yields could rise 4% thisyear rather than 1.9%, as was previously forecast, it said.
The major impact of higher fuel costs, however, would be on airline profits this year, theassociation said. The average oil price for 2011 is now expected to be $110 per barrel (Brent), a15% increase over the previous forecast of $96 per barrel. With estimates that 50% of the industry’s fuel requirement is hedged at 2010 price levels, the industry 2011 fuel bill will rise by $10billion to $176 billion.
In response to these factors, IATA further downgraded its 2011 airline industry profit forecastto $4 billion. This would be a 54% fall compared with the $8.6 billion profit forecast in March anda 78% drop compared with the $18 billion net profit (revised from $16 billion) recorded in 2010. Onexpected revenues of $598 billion, a $4 billion profit equates to a 0.7% margin.
“Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise inoil prices have slashed industry profit expectations to $4 billion this year. That we are makingany money at all in a year with this combination of unprecedented shocks is a result of a veryfragile balance. The efficiency gains of the last decade and the strengthening global economicenvironment are balancing the high price of fuel. But with a dismal 0.7% margin, there is littlebuffer left against further shocks,” said Giovanni Bisignani, IATA’s outgoing Director General andCEO. Bisignani is retiring at the current IATA AGM in Singapore and will be replaced by Tony Tyler,former head of Cathay Pacific.
Meanwhile, air freight growth at the world’s airports dropped to just 1.7% in April, accordingto the latest monthly figures from Airports Council International (ACI), the international airportsassociation. International freight tonnage was 2.8% high but domestic freight dropped 1%, a surveyof leading cargo airports showed.
Europe grew by a strong 15.8%, which was unsurprising given the impact of widespread airportclosures in April 2010 due to the Icelandic volcanic ash cloud. But Asia Pacific declined 1%, NorthAmerica was 2.9% lower and the Middle East grew only 1.7%. Latin America grew strongly by11.9%.
The figures confirmed the weaker growth trends seen at airports in the first few months of 2011but ACI stressed the figures should be seen in comparison to very strong growth rates of more than30% in the same months of 2010.
