The International Air Transport Association (IATA) today dramatically downscaled its air freightforecast for this year from 5.5 per cent to just 1.4 per cent although it also predicted the world’s
airlines will earn better profits this year.Air freight has stagnated since the start of the year, the association said. Airlines are nowexpected to carry 46.4 million tonnes of cargo in 2011, down from the previous forecast of 48.2million tonnes. This would be only a 1.4 per cent rise on 2010 compared to the previous forecast of5.5 per cent growth.
Weaker freight markets will see freight revenue projections fall to $67 billion, down $5billion compared to the June forecast. Freight yields are expected to stagnate this year due to anoversupply of belly cargo capacity compared to the previous projection of 4 per cent growth.
Air freight volumes reached their post-recession peak in May 2010, largely driven byre-stocking, and July’s traffic was 4 per cent lower than that level. It appears unlikely that arevival in air freight will begin before 2012, IATA commented.
The weakness of air cargo markets is disproportionately affecting Asia Pacific airlines owingto the larger share of cargo in airline revenues. The shocks from the Japanese earthquake andtsunami continue to affect supply chains and cargo markets (in which Asia Pacific carriers have thelargest market share).
More positively, IATA said a strong rebound is expected late in the year continuing into2012. Cargo markets should grow at 4.2 per cent next year, three times the 1.4 per cent growth of2011, but again with no growth in yields.
In contrast, passenger demand has been stronger than anticipated this year given the gloomyeconomic outlook. IATA’s forecast for the year now stands at 5.9 per cent growth, up from 4.4 percent projected in June.
In financial terms, IATA upgraded its airline industry profit expectations to $6.9 billion,up from $4 billion projected in June, although this would still only be a weak 1.2 per cent profitmargin on the industry’s total revenues of $594 billion. In its first look at 2012, IATA isprojecting profits to fall to $4.9 billion on revenues of $632 billion for a net margin of just 0.8per cent. IATA’s forecast is built around global projected GDP growth of 2.5 per cent in 2011falling to 2.4 per cent in 2012.
“Airlines are going to make a little more money in 2011 than we thought. That is good news.Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is agreat achievement,” said Tony Tyler, IATA’s Director General and CEO. “But we should keep theimprovement in perspective. The $2.9 billion bottom line improvement is equal to about a half apercent of revenue. And the margin is a paltry 1.2 per cent. Airlines are competing in a very toughenvironment. And 2012 will be even more difficult,” he added.
Looking ahead to 2012, IATA said the overall industry outlook will grow weaker. Debt-burdenedWestern economies look set for an extended period of weak economic growth—or worse. Whiledeveloping economies look to be in much better shape, the prospects for industry growth are limitedbecause many transport linkages are with developed nations. The fourth quarter of 2011 and thefirst half of 2012 may well see the weakest point for air transport markets, it predicted.
“It looks like we are headed for another year in the doldrums,” Tyler said. “With businessconfidence declining, it is difficult to see any potential for significant profitable growth.Relatively stronger economic growth and some rebound in cargo will help Asia Pacific airlines tomaintain their 2012 profits close to 2011 levels at $2.3 billion. The rest of the industry will seedeclining profitability. And the worst hit is expected to be Europe where the economic crisis meansthe industry is only expected to return a combined profit of $300 million. A long slow strugglelies ahead.”
