World airline profits come despite tough travel times
The International Air Transport Association (IATA) further downgraded its 2011 airline industry profit forecast by more than half, setting it at US$4 billion. On expected revenues of $598 billion, a $4 billion profit equates to a 0.7 percent margin.
There were several reasons cited.
“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. 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,” said Giovanni Bisignani, IATA’s Director General and CEO.
The cost of fuel was cited as the main cause of reduced profitability. The average oil price for 2011 is now expected to be $110 per barrel, a 15 percent increase over the previous forecast of $96 per barrel.
For each dollar increase in the average annual oil price, airlines face an additional $1.6 billion in costs.
Another factor: The number of price-sensitive leisure travelers has fallen three to four percent over the past five months, as travel costs were forced higher by fuel prices and, in Europe, by new passenger taxes, according to the IATA.
By David Wilkening
David
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