Unlike the robust air passenger sector, the air cargo industry has been in the doldrums since 2010, but it is forecast to produce more than 3 percent growth in 2014 as it experiences the strongest demand seen in the last four years.
Airfreight traffic is predicted to grow 3.1 percent in 2014 compared with 2013 as it goes through a weaker-than-normal cyclical upturn, according to the just-launched Economic Performance of the Airline Industry report of the International Air Transport Association (IATA).
The subdued uptick is due to “the unusual weakness of world trade that is related to a parallel trend of companies ‘on-shoring’ production,” the report noted.
Real freight rates are also expected to fall 4 percent this year.
The divergent growth trends between the slow cargo traffic and robust passenger volumes are creating difficulties for airlines in matching capacity to demand, noted the trade group.
“Capacity added to meet passenger demand brings in cargo capacity as well. The industry continues to pursue process improvements to improve competitiveness,” it added. “To boost competitiveness and revitalize trade growth, in addition to the e-freight initiative that will take paper out of back-office processes, the industry is working towards a goal of reducing shipping times by 48 hours from the current average of 6.5 days before 2020.”
Overall, airlines are expected to continue an improving trend in profit and realize earnings in 2014 of US$18 billion for a net profit margin of 2.4 percent. This will be up from earnings of $6.1 billion in 2012 and $10.6 billion last year.
The profit outlook is, however, a slight downgrade from the previous forecast of $18.7 billion made by IATA in March.
“Making ends meet for airlines has always been a challenge,” said Tony Tyler, IATA’s director general and CEO. “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/barrel. For the first time, the global load factor looks like it will average over 80% 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.”
All regions are expected to see an improved profitability in 2014 over 2013. Local issues and economic conditions, however, mean that the improvement is not uniform.
Airlines in the Asia-Pacific region in particular are expected to earn $3.2 billion in 2014, up on the $2 billion they made in 2013. A moderate improvement in cargo markets this year is expected to give the region’s airlines a boost, while passenger demand is expected to experience a healthy growth of 7.4 percent.
Photo: Hugh Llewelyn
