Outlook for airfreight gets bleaker

THE OUTLOOK for the airfreight industry is gloomier than expected. This is apparent from the release of a revised industry forecast by the International Air Transport Association (Iata) which now expects airlines to post losses of US$5.2 billion in 2008 based on an average crude oil price of US$113 per barrel (US$140 for jet fuel). “The situation remains bleak. The toxic combination of high oil prices and falling demand continues to poison the industry’s profitability,” said Giovanni Bisignani, Iata’s director general and CEO. Fuel is expected to rise to 36% of operating costs, up from 13% in 2002, he added. Cargo demand in July contracted by 1.9% compared to 2007 with Asia-Pacific carriers – the largest players in the cargo market – hit hard by a 6.5% drop in demand. Airfreight volumes are now expected to grow by just 1.8% (was 3.9%) this year. And Iata expects the difficult business environment to continue in 2009. “This crisis is re-shaping the industry in more severe ways than the demand shocks of SARS or 9.11. When fuel goes from 13% of your costs to 40% in seven years with an increased cost implication of US$183 billion, you simply cannot continue to do business in the same way. Fundamental change is needed,” said Bisignani.