IATA predicts 2021 air cargo revenue to hit record $ 175 billion

The air freight market is booming this year and 2022 is looking even better. The International Air Transport Association estimated on Monday that airline freight volume will increase 7.9% in 2021 compared to 2019 and demand will rise 13.2% above pre-pandemic levels. next year.

Freight revenues are expected to hit a record $ 175 billion in 2021, an upward revision of $ 23 billion from April, and stay near that level at $ 169 billion in 2022 as freight yields increase from 15% to 7% growth. Airlines generated $ 128 billion in freight revenue last year, also a record high.

The positive news from the company’s air cargo side has been tempered by the trade association’s estimate that airlines will lose $ 51.8 billion this year due to reduced passenger travel associated with COVID and border restrictions. But the financial situation has improved significantly from the loss of $ 137.7 billion last year.

“We have passed the deepest point of the crisis. Although serious problems remain, the road to recovery is looming, ”IATA chief executive Willie Walsh told the organization’s annual general meeting in Boston, according to an official. copy of his prepared remarks.

Global air freight demand in 2020 fell 10.6% year-over-year, the largest drop since IATA began monitoring freight performance in 1990. The negative growth was mainly due to in the first half of the year, when COVID shut down much of the global economy and crippled passengers. to travel. During the second half of the year, freight volume skyrocketed as companies tried to quickly restart production and sales.

In January, the air freight market was in positive territory compared to 2019 and continued to grow, driven by economic expansion, low inventories, e-commerce and diversion from crowded shipping. The The World Trade Organization on Monday revised its forecast upwards for world merchandise trade to grow 10.8% in 2021, with trade slowing to 4.7% – close to the long-term trend – in 2022.

Demand in the first half of 2021 was 8% higher than the same period in 2019, representing the strongest growth since 2017. The final performance figures may be higher than IATA’s projections for base of extreme market tension and large shippers spending more on air travel to get goods in time for holiday shopping.

The IATA metric for freight volume is the freight tonne-kilometer, which takes into account the distance traveled by goods. And the organization doesn’t track many all-cargo carriers, an industry that’s currently booming compared to passenger-dominated competitors.

But measured simply by weight, air freight carried by airlines this year will reach 73 million tonnes, up from 68 million tonnes in 2019. Next year, 76.3 million tonnes of goods, materials, equipment and food products will be shipped by air. More available capacity is the reason that rates, and by extension revenues and yields, are expected to decline despite volume growth.

Lose money

Most passenger airlines have survived the pandemic crisis, but they are not yet out of the financial woods. The industry’s net losses are expected to reach $ 51.8 billion this year, but decline further to $ 11.6 billion next year, according to IATA forecasts.

Over the three-year period ending in 2022, airlines will have lost a combined total of $ 201 billion, the airline group said. Carriers have been forced to dramatically cut costs, put workers on leave, borrow heavily, and in many cases rely on government bailouts worth around $ 110 billion to keep operating. . Cargo was one of the airlines’ few sources of revenue, and sales hit an all-time high last year.

The strength of freight sales is not enough to overcome the sharp drop in passenger revenues, the core business of airlines. Overall revenue in 2021 is expected to increase 26.7% from a year ago, to $ 472 billion, on par with industry sales a dozen years ago. Further growth of 39.3% in 2022 will bring industry revenue to $ 658 billion – similar to 2011 levels – according to IATA forecasts. But the costs will far exceed the revenues.

Airlines have cut overall spending by 34% this year compared to 2019, but costs will only be 15% lower than pre-crisis levels in 2022 as companies expand operations and face pricing. higher jet fuel.

Last year, kerosene fell to $ 46.60 per barrel, from $ 77 per barrel in 2019. Jet fuel has risen to $ 74.50 on average this year and is expected to hit 2019 levels next year. Unit costs excluding fuel increased by 19% in 2020, as fixed costs had to be spread over a much smaller fleet. Unit costs will rise to 11% above the pre-crisis level, with additional capacity reducing the gap to 2% in 2022, according to IATA.

Airlines executives are meeting in Boston on Monday and Tuesday to discuss the state of the industry and the path to recovery.

People haven’t lost their desire to travel but are being held back by “extremely inconsistent” COVID travel restrictions that are blocking the resumption of air travel, Walsh said.

“Travel restrictions have given governments time to respond to the onset of the pandemic. Almost two years later, this logic no longer exists. COVID-19 is present in all regions of the world. And there is little evidence to support the ongoing general border restrictions and the economic havoc they create, ”Walsh complained in his remarks.

He reiterated calls for governments to reopen borders and simplify public health measures used to manage the risk of international travel.

“COVID-19 measures must not be allowed to become permanent. The measures should only remain in place for as long as is necessary, not a day longer. As we do with many safety regulations, defined review periods are required. Otherwise, as we said in the aftermath of 9/11, well-intentioned measures could remain in place long after they are needed or have become technologically or scientifically obsolete, ”Walsh said.

The reopening of US borders in November to vaccinated foreign travelers is expected to increase passenger traffic.

Global passenger demand will only return to 40% of 2019 levels this year, reaching 61% in 2022. Passenger traffic is expected to reach 2.3 billion, then 3.4 billion in 2022 – roughly at the level where demand was in 2014 and well below 4.5 billion. travelers in 2019, according to IATA.

Domestic passenger markets, especially in the United States, are not subject to as many travel restrictions and are leading the overall recovery. Demand this year and 2022 will improve to 27% and 7% less, respectively, than before the pandemic. International demand will lag behind, down 78% and 56% respectively in 2021 and 2022.

The number of travelers dictates the number of aircraft carriers that will employ, which is important for freight companies, as more than half of the cargo carried by air travels in the lower deck of passenger planes. The continued decline in the passenger market has reduced overall cargo capacity by more than 12% despite an influx of several hundred cargo planes over the past year.

IATA said passenger capacity would grow faster than demand growth, reaching 50% of pre-crisis levels by 2021, with the average passenger load factor expected to be just 67.1% – a a level not seen since 1994. In 2022, passenger capacity should increase. exceed demand at 67% of the 2019 baseline, with average passenger load factors recovering to 75.1% – or to their 2005 level. In 2019, 82.6% of airline seats were occupied .

North American carriers should outperform other regions thanks to the rapid recovery of the US domestic market. Opening the US market to vaccinated travelers in November will push the recovery to international markets. The US industry started generating positive liquidity in the second quarter of 2021 and will be the only region in positive financial territory in 2022 with an expected profit of $ 9.9 billion.

Airlines are heavily indebted due to public and private borrowing, and the return to profitability that will allow loan repayment will take time. IATA urged governments to provide salary support so industry can retain essential skills until borders fully reopen, as well as maintain waivers on meeting take-off slot use thresholds / landing at busy airports.

Click here for more FreightWaves / American Shipper stories by Eric Kulisch.

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