IATA: World Airline Profits Forecast Down 54%
June 6, 2011
The International Air Transport Association cut its 2011 airline-industry profit forecast by 54 percent because of higher oil prices, political protests in the Middle East and North Africa, and the Japan earthquake.
Carriers will make $4 billion in profits this year on sales of $598 billion, a margin of 0.7 percent, the group, representing 238 airlines, said in a statement today at its annual general meeting in Singapore. It raised its forecast for the average price of Brent crude to $110 a barrel from $96.
“The oil price is a concern for the whole industry,” Singapore Airlines Ltd. (SIA) Chief Executive Officer Goh Choon Phong said yesterday. “And, it’s not something within our control.”
IATA also pared its forecasts for passenger and cargo growth as it released the new profit estimate, which represents a 78 percent decline from last year’s earnings. Every $1 increase in the price of Brent crude adds $1.6 billion to industry costs, IATA said.
“This year started in a very difficult way with the unrest in the Middle East and the crisis on fuel,” Giovanni Bisignani, the group’s head, said yesterday in an interview with Bloomberg Television. The aftermath of the March 11 earthquake in Japan, which accounts for almost 10 percent of global airline sales, has also been a “nightmare,” he said.
The group expects passenger demand to grow 4.4 percent this year, down from a forecast of 5.6 percent in March. The cargo growth forecast was cut to 5.5 percent from 6.1 percent.
IATA, whose members account for 93 percent of global passenger traffic, in March forecast global profits of $8.6 billion this year, a decline from a December forecast of $9.1 billion. Carriers made $18 billion last year, IATA said today, revising an earlier estimate.