The International Air Transport Association (IATA) has downgraded its 2011 airline industry profit forecast to $4 billion. This would be a 54 per cent fall compared with the $8.6 billion profit forecast in March and a 78 per cent drop compared with the $18 billion net profit (revised from $16 billion) recorded in 2010. On expected revenues of $598 billion, a $4 billion profit equates to a 0.7 per cent margin.
The cost of fuel is the main cause of reduced profitability. The average oil price for 2011 is now expected to be $110 per barrel (Brent), a 15 per cent increase over the previous forecast of $96 per barrel.
The association warned that the key risk to the outlook is a weakening of global economic growth, CPIfinancial reported.
Asia-Pacific carriers are expected to earn $2.1 billion – the most profitable of all regions. Even so, this is dramatically down from the $10 billion profit that the region achieved in 2010. Airlines in the region are more exposed than others to cargo markets and fuel price fluctuations.
North American carriers will see the $4.1 billion profit of 2010 fall to $1.2 billion. The region’s carriers are being hit on the cost side by rising fuel prices, exacerbated by an older, less fuel-efficient aircraft fleet.
IATA said that European carriers will deliver a $500 million profit, down from $1.9 billion in 2010. The sovereign debt crisis is dampening demand from the peripheral European economies.
Middle East carriers will deliver a $100 million profit, down from $900 million in 2010. Political unrest in parts of the region is hurting demand.
Latin American carriers will be the only region to deliver a third consecutive year of profits. The regional economies continue to show good growth, and trade links with the United States and Asia in particular are boosting traffic.
African carriers are forecast to be the only region to post a loss, $100 million, in 2011. Political unrest across Northern Africa is dampening demand, particularly in Egypt and Tunisia, which have proportionately large tourism industries.
