These curves used to match each other and only started to diverge in early 2011. There are also other signs that “something strange is going on,” according to Julie Perovic, IATA’s senior economist. World trade has grown steadily for three years but has lost its correlation with airfreight, which she said was “dropping off” while container shipping volumes have held up well.
Inventory-to-sales ratios have stayed level for three years, however, so it wasn’t the case that businesses were stockpiling and could afford to move products more slowly. “It’s not displacement,” Perovic said.
The likely answer was that emerging economies such as China, India and Latin America were now driving global growth and were transporting bulk commodities by sea rather than flying low-volume, high-value goods. The U.S. and Europe have lost their historic dominance and were now responsible for just 9 percent and 7 percent respectively of trade growth.
Nevertheless, there is some room for optimism. “Business confidence showed some improvement in the fourth quarter. Indications are that the business environment will be more stable in the months ahead,” Perovic said. “We believe volume demand for airfreight will grow at a faster pace next year.”
IATA has upgraded its forecast for airline profits, which are now expected to reach $6.7 billion in 2012 and increase to $8.4 billion in 2013. But Tony Tyler, director general and CEO, warned at the organization’s global media day on Thursday that these revised figures represented a post-tax margin of only 1 percent and 1.3 percent respectively.
IATA calculates that the industry needs a margin of 7-8 percent to recover its cost of capital. Tyler said he would “not be surprised” if one or two airlines went bankrupt in the next few months, despite recent efficiency gains resulting from alliances and joint ventures.
Brian Pearce, IATA chief economist, said next year’s modest improvement in profitability was “far from an adequate return to investors” and would leave airlines short of the $8.8 billion they earned in 2011.
“U.S. airlines continue to improve their profitability, although they are still earning less than 2 percent,” Pearce said. “Performance in Asia-Pacific is mixed but overall profitability has not deteriorated as much as we had expected, despite the weakness of cargo markets.”
The Eurozone crisis and regulatory pressures would leave European airlines in the weakest position globally. “They will do little better than break even,” Pearce said.
Although a gradual growth in world trade in 2013 and a predicted easing in oil prices could benefit airfreight, it was “still a difficult economic environment,” Pearce warned. “There are more downside risks than upside risks, in particular the continuing weakness in European economies, the American fiscal position and Middle East geopolitical issues.”
These curves used to match each other and only started to diverge in early 2011. There are also other signs that “something strange is going on,” according to Julie Perovic, IATA’s senior economist. World trade has grown steadily for three years but has lost its correlation with airfreight, which she said was “dropping off” while container shipping volumes have held up well.
Inventory-to-sales ratios have stayed level for three years, however, so it wasn’t the case that businesses were stockpiling and could afford to move products more slowly. “It’s not displacement,” Perovic said.
The likely answer was that emerging economies such as China, India and Latin America were now driving global growth and were transporting bulk commodities by sea rather than flying low-volume, high-value goods. The U.S. and Europe have lost their historic dominance and were now responsible for just 9 percent and 7 percent respectively of trade growth.
Nevertheless, there is some room for optimism. “Business confidence showed some improvement in the fourth quarter. Indications are that the business environment will be more stable in the months ahead,” Perovic said. “We believe volume demand for airfreight will grow at a faster pace next year.”
IATA has upgraded its forecast for airline profits, which are now expected to reach $6.7 billion in 2012 and increase to $8.4 billion in 2013. But Tony Tyler, director general and CEO, warned at the organization’s global media day on Thursday that these revised figures represented a post-tax margin of only 1 percent and 1.3 percent respectively.
IATA calculates that the industry needs a margin of 7-8 percent to recover its cost of capital. Tyler said he would “not be surprised” if one or two airlines went bankrupt in the next few months, despite recent efficiency gains resulting from alliances and joint ventures.
Brian Pearce, IATA chief economist, said next year’s modest improvement in profitability was “far from an adequate return to investors” and would leave airlines short of the $8.8 billion they earned in 2011.
“U.S. airlines continue to improve their profitability, although they are still earning less than 2 percent,” Pearce said. “Performance in Asia-Pacific is mixed but overall profitability has not deteriorated as much as we had expected, despite the weakness of cargo markets.”
The Eurozone crisis and regulatory pressures would leave European airlines in the weakest position globally. “They will do little better than break even,” Pearce said.
Although a gradual growth in world trade in 2013 and a predicted easing in oil prices could benefit airfreight, it was “still a difficult economic environment,” Pearce warned. “There are more downside risks than upside risks, in particular the continuing weakness in European economies, the American fiscal position and Middle East geopolitical issues.”