Oil prices remain ‘toxic risk’ for industry

Oil prices continue to weigh heavily on both the fragile signs of an air cargo market recovery and the profitability of airlines this year with International Air Transport Association (IATA) recently downgrading its industry outlook for 2012 primarily due to rising oil prices. Trimming US$500 million from its earlier December forecast, IATA expects airlines to turn a global profit of $3 billion in 2012 for a paltry 0.5 per cent global margin.


Oil prices remain ‘toxic risk’ for industry


Oil prices continue to weigh heavily on both the fragile signs of an air cargo market recovery and the profitability of airlines this year with International Air Transport Association (IATA) recently downgrading its industry outlook for 2012 primarily due to rising oil prices. Trimming US$500 million from its earlier December forecast, IATA expects airlines to turn a global profit of $3 billion in 2012 for a paltry 0.5 per cent global margin.

While the industry received a fragment of good news in the latest ppreliminary traffic figures for the month of February released by the Association of Asia Pacific Airlines (AAPA) which showed positive growth in both international air cargo and passenger markets, the positive sentiment is overshadowed by the steady climb of oil prices now forecast by IATA to average $115 per barrel, up from the previous December forecast of $99 per barrel. Airlines based in the Asia Pacific region saw international air cargo demand, in freight tonne kilometre (FTK) terms, grow by 7.8 per cent compared to the softer freight market conditions last year when the Chinese New Year holidays fell in the month of February. Offered freight capacity increased by 6 per cent with an average international cargo load factor of 66.1 per cent.