High oil price cuts airline profit in half

City A.M. Reporter
GLOBAL airlines have cut their 2011 profit forecast by more than half to $4bn (£2.4bn) as high oil prices and turmoil in Japan, North Africa and the Middle East weigh on the industry’s recovery.

The International Air Transport Association (IATA), which represents most global carriers, disclosed the new forecast yesterday, and also warned of a looming trade war if Europe moves ahead with plans to force airlines to join an emissions trading scheme next year. China said it would support legal action.

Airlines say the scheme, designed to tackle growing emissions from the aviation industry, will only increase costs and add to pressures already caused by the sluggish global economy.

“The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel,” IATA’s director general, Giovanni Bisignani (pictured), told the group’s annual general meeting in Singapore.

“But with a dismal 0.7 per cent margin, there is little buffer left against further shocks,” he said.

The IATA $4bn profit forecast compares with an $8.6bn forecast on 2 March, just before the Japan earthquake and tsunami triggered a nuclear meltdown at a power station. Since then, the Arab uprisings have spread and oil has been well above $100 a barrel.

The forecast would mark a drop of more than three-quarters from the industry’s estimated 2010 profit, which was raised to around $18bn from $16bn.