International Air Transport Association (IATA) is not always the most optimistic organisation, however the view it presented on Monday was of a continuing increase in profits for the airline sector as a whole threatened only by the possibility of problems in the Chinese economy. This outlook includes the air cargo business which has already experienced a degree of recovery.
In his address to the organisations annual conference yesterday, Tony Tyler, IATA’s CEO described a slight downturn in profits for the world’s airlines in the short-term, however over the longer-term the sector is seeing modest increases in profitability although the business as a whole still struggles to reach the cost of capital.
The air freight market has appeared to be a less hostile environment over the past 12 months. The latest numbers show that in April year-on-year growth measured in freight tonne kilometres was up 3.2% although this was less than the 6.2% increase seen in March. Looking deeper into the figures the picture was less happy with all of the growth being due to higher demand towards the end of 2013. This year seems to have experienced almost no growth as expansion in world trade has slowed. North and South America are seeing volume increases in low single figure percentages. Asia Pacific looks slightly healthier although this is as much a rebound from previous low figures.
As Mr Tyler warned about the industry in general, IATA’s economics department observed about the air freight market that “continued weakness in Chinese manufacturing activity remains a downside risk for regional economic performance, which ultimately would impact trade growth and air freight demand for local carriers.” It continues, stating that “demand drivers have paused” although there is some cause for optimism as US and possibly some European markets are likely to see a recovery towards the end of the year. That said, load factors are terrible, hovering around the mid-40%, due in great part to the flood of new passenger aircraft and the consequent increase in belly-freight.
It is interesting that IATA is seeing faster growth in air cargo than is often reported by air freight forwarders and many airlines. This may be due to different market segments and regions having a considerable disparity in performance. None-the-less the short-term prospects still remain limited.