High oil prices to nearly halve airline profits: IATA

GENEVA: High oil prices will cut airline industry profits by nearly half this year to $8.6 billion, the International Air Transport Association said on Wednesday.

In a revised profit forecast, IATA said it was downgrading its airline industry outlook for 2011 to $8.6 billion from the $9.1 billion it estimated in December.

"This is a 46 percent fall in net profits compared to the $16 billion earned by the industry in 2010," IATA said in a statement.

"The biggest shift in our forecast is the price of oil," IATA director general Giovanni Bisignani told reporters.

"Profits will be cut in half compared to last year and margins are a pathetic 1.4 percent," he said.

Airlines are expected to face a fuel bill for $166 billion on revenues of $594 billion even as air travel grows faster than expected and capacity is added.

IATA increased its forecast for the growth in passengers to 5.6 percent in 2011 from its previous estimate of 5.4 percent.

The new forecasts were based on oil prices averaging $96 per barrel of Brent crude over the year.

Unrest in the Middle East was pushing up Brent crude for April delivery above $115 again on Wednesday, after it rose to near $120 last week.

IATA officials said the global economic recovery was propping up the industry's remaining profits, reviving travel and air freight.

But rising oil prices add to the uncertainties already tempering hopes for the recovery and have the potential to dampen economic growth if they last or grow further.

Bisignani said that the new figures demonstrated the fragility of the airline industry, which also has debts of $210 billion, with signs of a reversal so soon after a swift post-global-crisis turnaround last year.

"There is no buffer against shocks," he said.

"This is an industry that is not sustainable in the long term."

IATA declined to comment on the prospect of fuel surcharges or increased ticket prices for passengers, saying those were matters for individual airlines.

The association represents some 230 carriers that account for more than 90 percent of scheduled air traffic globally but does not include many of the big budget airlines.