Airline industry profits to fall 78% in '11

Singapore: The International Air Transport Association (IATA), which represents 93 per cent of scheduled air traffic worldwide, today said the airline industry globally was likely to make a profit of just $4 billion this year.
The forecast represents a 54 per cent fall compared to estimates put out by the trade body in March, and is 78 per cent lower than the $18-billion profit that the industry recorded in 2010.
“Natural disasters in Japan, unrest in West Asia and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year. That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance,” IATA Director General and CEO Giovanni Bisignani said in a statement.
“The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7 per cent margin, there is little buffer left against further shocks,” he added.
The high cost of fuel — with average oil prices expected to remain around $110 per barrel in 2011, as against previous forecasts of $96 per barrel — is the main cause for the fall in profitability. For each dollar increase in the average annual oil price, airlines face an additional $1.6 billion in costs.
“We have built enormous efficiencies over the last decade. In 2001, we needed oil below $25 per barrel to be profitable. Today, we are looking at a small profit with oil at $110 per barrel,” said Bisignani.
07/06/11 Devjyot Ghoshal/Business Standard

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Categories: Foreign Jun 2011, Indian Aviation- In General Jun 2011