Will 2008 be a ‘valley’ or a ‘canyon’?

The big question on the air cargo industry’s minds is how this year is going to shape up. While virtually the entire industry is already feeling the pain of high fuel prices, yield pressure from over-capacity and modal shift to sea, along with the credit-market upheaval are already looking set to spoil the industry’s short-livedparty […]


The big question on the air cargo industry’s minds is how this year is going to shape up. While virtually the entire industry is already feeling the pain of high fuel prices, yield pressure from over-capacity and modal shift to sea, along with the credit-market upheaval are already looking set to spoil the industry’s short-livedparty last year where most carriers reported rosy numbers.

The International Air Transport Association estimated a global airline industry profit of US$5 billion in 2008, down from previous guidance of US$7.8 billion. The trade group maintained its forecast of a US$5.6 billion profit this year, which will be the industry’s first since 2000, as higher oil prices were more than off set by strong traffic and revenue growth. But will carriers be able to repeat that this year – most likely not, especially cargo carriers that feel the sting of high fuel prices even more acutely.

Record high oil prices were expected to add US$14 billion to the airline industry’s total fuel bill of US$149 billion next year, based on an average price of $78 per barrel. A barrel of light sweet crude in late February broached the US$100 mark in afternoon trading on the New York Mercantile Exchange, no doubt sending shivers down the backs of most airline CEOs. But juxtaposed against this increasingly pessimistic view of the carriers is that of Airbus and Boeing. The two airframe manufacturers are practically euphoric, having clocked up record orders last year.