Macroeconomic factors to put brakes on Asia Pac’s transport sector

Higher oil prices, such as the 46% increase in jet fuel prices, have lowered companies' profitability.

According to Standard & Poor’s, average jet fuel prices had increased 46% year-on-year.

Here’s more from S&P:

The financial performance of transportation companies in the Asia-Pacific region continued its gradual improvement into mid 2011 largely due to improved macroeconomic conditions. But higher fuel prices and the growing economic uncertainties of the past two months could cloud the sustainable recovery and growth that we have seen so far in the industry.

That's according to an industry report card titled " Asia-Pacific Transportation Companies: Stories Differ, But Fuel Prices And Economic Uncertainties Are Common Hurdles," that Standard & Poor's Ratings Services recently published.

According to the report, some of the sectors that the global financial crisis affected the most, especially airlines and container shipping, recovered faster amid the economic growth of the past year. Nonetheless, higher oil prices have lowered companies' profitability. Average jet fuel prices had increased 46% year-on-year as of June 30, 2011.

One-off events such as the tsunami in Japan and floods in Queensland also affected profitability in the first half of 2011. But the trend toward alliances continues with incumbent airlines and low cost carriers negotiating ventures. This should increase the competition in short- and middle-haul routes.

"The business outlook for shipping companies in Asia-Pacific remains weak because of continuing transportation supply exceeding demand. In addition to high fuel prices and economic uncertainties, other factors, mainly overcapacity, will continue to hinder the recovery of the main shipping sectors in Asia-Pacific and globally," said Standard & Poor's credit analyst Manuel Guerena.

"So, while we expect global shipping volumes to grow during the year, we believe overcapacity will result in strong pressure on prices and continuing volatility in freight rates at least until the second half of 2012."

Nevertheless, Standard & Poor's believes that industry fundamentals will improve over time, along with a potential increase in demand from fast growing economies in the Asia-Pacific region, such as China, India, Vietnam, and Indonesia.

Photo credit: madaboutasia

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia