Near-term environment
Recent data suggests that the global economy continues to recover, though as expected, the pace of growth has moderated compared to the strong rebound in late 2010. Emerging economies, led by China, outpace the average world GDP growth, while the established economies of the United States, Europe, and Japan are expanding at a more modest rate. High oil prices and price volatility resulting from the political unrest in the Middle East pose the primary threats to continued recovery.
Passenger traffic rebound
Mirroring the economic recovery, passenger traffic will be buoyed by growing demand in emerging markets and bolstered by low-cost carriers. These drivers will help keep worldwide demand for air transport at or above the historical 5 percent growth trend, as the effects of recent shocks subside in the second half of 2011.
Air cargo recovery
Air cargo traffic surged to recover prior peak volumes more quickly than expected in 2010. Growth in air cargo will retreat toward the long-term trend in 2011 as moderating economic growth, rising fuel prices, and supply chain disruptions from the Japan earthquake work affect the industry.
Airline profitability revives
Airlines are managing capacity to maintain yields and profitability in the face of challenging external events, including the political upheaval in the Middle East, the earthquake in Japan, and the continued volatility of fuel cost. Although global airline profitability is expected to decline from last year's record levels, it will remain positive-despite the more than 30 percent jump in fuel prices compared to last year. Currently, airlines are projected to earn US$4 billion in net profits in 2011, compared to US$18 billion earned in 2010. Airlines in Asia are forecast to be the most profitable, driven by growing demand within the region. North American airlines will follow closely, boosted by capacity discipline in the US domestic market.
