Airfreight rate growth to tail off towards 2016 say analysts
Source:aircargoweek 2014-1-27 9:42:00
According to the IBISWorld Buyer Power Score for Air Transportation Services, prices increased at an annualised rate of 6.3 per cent from 2010 to 2013, during which time they were also "moderately volatile," however, price growth is forecast to decelerate in the three years to 2016. Carriers are expected to increase their profit margins because price rises will still exceed the rate of fuel cost increases, the report predicts.IBISWorld puts annual price growth at two per cent during 2013 to 2016 and the slower growth will be accompanied by reduced volatility, with average year-on-year changes in price decreasing to about 0.6 per cent.The firm estimates that fuel costs are equivalent to about 9.1 per cent of airfreight carriers' revenue, and much of this rising cost is passed on to shippers.Slowing increases in fuel prices and higher profit margins, "will however in future, give carriers more room to discount as they attempt to win back shippers," it says. During the previous three years, fuel surcharges have reduced transparency in the market. IBISWorld research analyst Hayden Shipp says: "Although surcharges are intended to create transparency, the past decade's string of surcharge price fixing cases and many airlines' plea deals have shown that they can be used to generate revenue beyond the costs they recover."Carriers have yet to rescind the surcharges imposed in response to the sharp spike in fuel costs in 2008, but since then, fuel costs have continued to rise, and carriers' profit margins have stayed relatively low. Because shippers must pay non-negotiable surcharges and because airlines' low profit margins leave suppliers with little room to discount, fuel price volatility has, up till now, reduced buyers' negotiation power, the report argues.