IATA predicts stormy weather as profit margins shrink
Expected airline profits for 2011 were halved from $8.6 billion to $4 billion by the International Air Transport Association yesterday as high oil prices continue to sting.
IATA director general Giovannia Bisignani told the group’s AGM in Singapore: "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 percent margin, there is little buffer left against further shocks."
The industry’s estimated profits in 2010 were $16 million. Carriers bounced back from the recession faster than was anticipated last year, aided by higher traffic and a a tight reign on capacity.
However, a number of factors such as the ash cloud plus higher oil prices have hit the business hard this year.
IATA now predicts a $110 per barrel average oil price in 2011, up 15 percent from $96 last year.
The group also warned delegates at the AGM that capacity was due to expand 5.8% in 2011, whereas demand was set for a 4.7% increase.
by Dinah Hatch
Dinah
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