Emerging markets will drive airline growth – economist

08 May 2013 17:52  [Source: ICIS news]

BERLIN (ICIS)--Middle East and Latin America markets will show most growth in the airline industry in the next five years, an analyst said on Wednesday.

Speaking at the International Air Transport Association (IATA) Fuel Forum, Julie Perovic, an IATA senior economist, said passenger demand is expected to continue to grow at around 5%, led by Middle Eastern carriers.

However, the cargo market continues to stagnate, which she explained was due to a shift in the mode of transport, with world freight being moved by sea than air, due to a relocation of economic growth.

China, India and Latin America are driving the demand for world trade and bulk commodities, which are more likely to be shipped by sea.

High value and lighter commodity items that are sent by air and usually favoured by Europe and America have weakened and contributed less to world growth.

Perovic also said net margins of the airline industry reflect economic growth levels and margins are expected to be thin.

Even with these challenges, airlines are achieving profits at near 2006 levels due to improvements in asset utilisation, consolidation and capacity control.

Perovic said the IATA forecast is for an improvement in cargo demand, as a result of stability in the eurozone and growth in the US, which will come from an improvement in manufacturing sectors of the Asia Pacific region.

Boeing director and market analyst James Billing agreed there were positive outcomes for the airline industry in both the short and long term.

He said air travel demand is expected to outpace gross domestic product (GDP) over the next 20 years and that low cost airlines will continue to grow.

By: Kate Wilcock
+44 208 652 3214

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