IATA slashes profit forecast for airline industry
The International Air Transport Association has slashed its profit forecast for the airline sector due to rising fuel costs.
It expects airline industry profits to be just $4bn in 2011 compared to $18bn in 2010.
In March, IATA had forecast profits of $8.6bn for this year.
“Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year,†said Giovanni Bisignani, IATA director general and CEO.
“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. 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% margin, there is little buffer left against further shocks.â€
IATA said overall capacity, which combines passenger and cargo capacity, is expected to expand 5.8%, which is above the 4.7% anticipated increase in demand.
The gap between capacity and demand growth has widened to 1.1 percentage points from 0.3 percentage points in the previous forecast.
It said airlines in Asia-Pacific are expected to remain the most profitable in the sector.
For European airlines, much of the profit forecast for this year is expected to be generated on more buoyant long-haul markets, said the IATA report.
By Bev Fearis
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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