At least there is some optimism about economic trends in transport. IATA (International Air Transport Association) has just had its annual conference and the analysis of the prospects for the airline industry it published at the conference is upbeat.
The Association’s perception of the condition of the passenger business is that “industry-wide revenue passenger-kilometres (RPKs) are likely to be at 87.8% of the 2019 level for 2023 as a whole”. This represents a doubling of the activity seen in 2022 but it also suggests that there is still a lot of growth to come in 2024 as the global fleet of aircraft is still not fully utilised. IATA comments that the passenger airline business is benefiting from “pent-up demand” for travel, which is surely an understatement.
However, air cargo is on a different trajectory, having “pulled back to somewhat below 2019 levels”. Yet its “share of total airline revenue, however, is around 20% and double the pre-pandemic average.” This would imply that the whole of the aviation industry is not yet that profitable, something confirmed by IATA, who see net profit margins of only 1.2%, with a total net profit for the whole industry of US$9.8bn and an operating profit of US $22.4bn.
Over the long-term, IATA see the demand for air transport doubling over the next 13 years, with an annual rate of growth 3.4%. The Association describes wider economic trends as “a decent, if unspectacular, backdrop for aviation.”
This would suggest that the outlook for air freight is relatively benign from a shipper’s point of view. Strong passenger service provision means strong belly-freight provision. An annual rate of growth of 3.4% is probably at about the same rate or possibly more than the growth of global trade in merchandise. If so, the airfreight market is likely to return to the condition of oversupply that was so often seen prior to 2020.
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Source: Ti Insights
Author: Thomas Cullen
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