Airline industry’s profit forecast halved
Global airlines have more than halved their forecast for 2011 industry profits on the back of high oil prices and turmoil in Japan, North Africa and the Middle East.
Industry body the International Air Transport Association, whose airlines claim to carry 93 per cent of global passenger traffic, said on Monday it expected industry profits of $4bn (£2.4bn) in 2011, down from a previous forecast of $8.6bn.
“The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel,” IATA Director General Giovanni Bisignani 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.”
Economists say the industry’s outlook is a guide to the strength of cyclical recovery in developed markets and growth in emerging economies, which rely heavily on air transport.
The 230-member IATA also revised up its estimate for profits in 2010, to $18bn from $16bn.
Airlines rebounded faster than expected from recession last year, helped by higher traffic and a drive to keep a lid on spare capacity. But a series of external shocks and higher oil prices have hit the industry hard this year.
Airlines had been bracing for lower 2011 forecasts at this week’s major conference as fears grow over the global economy.
IATA is forecasting a $110 per barrel average oil price in 2011, up 15 per cent from $96 last year.
It issued a warning that capacity was set to expand 5.8 per cent in 2011, outstripping a 4.7 per cent increase in demand. The 1.1 percentage point gap is sharply higher than 0.3 per cent previously forecast.
Bisignani has said a lack of discipline as airlines jostle for market share could dent the industry’s recovery.