So says Justin Zubrod, vice president with global consulting firm BoozAllen Hamilton. Given the environment in the airfreight sector today, one could easily call Zubrod's comment an understatement—on a grand scale.
Skyrocketing fuel prices, escalating security concerns, revised inventory management policies, competition from other transport modes, and industry consolidation—these five factors pose significant challenges for the air cargo sector.
"We are still in the red, but what other industry could add $24 billion to its second-largest cost—fuel—in one year and still improve the bottom line?" asks Giovanni Bisignani, director general and CEO of the International Air Transport Association (IATA), summing up the state of the airline industry as a whole.
IATA's airline members carried 3.7 percent more cargo in July 2006 than one year earlier. This figure was lower than the more than 6 percent growth forecasted. The slower growth was largely a by-product of the conflict in the Middle East, which had been the fastest-growing air cargo region for the past two years.
Traffic results for the first seven months of 2006 show freight growth of 5.3 percent over the same period last year. "While we expect to see another isolated dip in August due to the UK terror alert, overall, improved efficiency and high load factors will help mitigate the impact of high oil prices, and bodes well for the bottom line," notes Bisignani.
IATA's latest industry forecast shows a modest improvement in financial performance this year, with net losses falling to $1.7 billion and operating profitability improving, in spite of a further rise in oil prices. This compares to a $3.2-billion loss in 2005, and a fuel bill of $91 billion.
FedEx and UPS now hold the top two positions in the global carrier rankings, with UPS showing strong enough growth to move up from fourth to second place during 2005.
Here is a closer look at each issue, its impact on the airfreight industry and, by extension, on shippers and receivers.
So says Justin Zubrod, vice president with global consulting firm BoozAllen Hamilton. Given the environment in the airfreight sector today, one could easily call Zubrod's comment an understatement—on a grand scale.
Skyrocketing fuel prices, escalating security concerns, revised inventory management policies, competition from other transport modes, and industry consolidation—these five factors pose significant challenges for the air cargo sector.
"We are still in the red, but what other industry could add $24 billion to its second-largest cost—fuel—in one year and still improve the bottom line?" asks Giovanni Bisignani, director general and CEO of the International Air Transport Association (IATA), summing up the state of the airline industry as a whole.
IATA's airline members carried 3.7 percent more cargo in July 2006 than one year earlier. This figure was lower than the more than 6 percent growth forecasted. The slower growth was largely a by-product of the conflict in the Middle East, which had been the fastest-growing air cargo region for the past two years.
Traffic results for the first seven months of 2006 show freight growth of 5.3 percent over the same period last year. "While we expect to see another isolated dip in August due to the UK terror alert, overall, improved efficiency and high load factors will help mitigate the impact of high oil prices, and bodes well for the bottom line," notes Bisignani.
IATA's latest industry forecast shows a modest improvement in financial performance this year, with net losses falling to $1.7 billion and operating profitability improving, in spite of a further rise in oil prices. This compares to a $3.2-billion loss in 2005, and a fuel bill of $91 billion.
FedEx and UPS now hold the top two positions in the global carrier rankings, with UPS showing strong enough growth to move up from fourth to second place during 2005.
Here is a closer look at each issue, its impact on the airfreight industry and, by extension, on shippers and receivers.
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