IATA cuts 2011 profit forecast to USD 8.6 bln due to rising oil price
The International Air Transport Association (IATA) has downgraded the industry's profit outlook in 2011 to USD 8.6 billion from USD 9.1 billion previously due to rising crude oil price.
The new estimate is a 46 per cent fall in net profits compared to the USD 16 billion (revised from USD 15.1 billion) earned by the industry in 2010.On expected industry revenues of USD 594 billion, the USD 8.6 billion 2011 profit equates to a net profit margin of 1.4 per cent.
"Political unrest in the Middle East has sent oil over USD 100 per barrel.
"That is significantly higher than the USD 84 per barrel that was the assumption in December," IATA director-general and chief executive officer Giovanni Bisignani said in a statement yesterday.
At the same time, the global economy is now forecast to grow by 3.1 per cent this year -- a full 0.5 percentage point better than predicted just three months ago.
"But stronger revenues will provide only a partial offset to higher costs. Profits will be cut in half compared to last year and margins are a pathetic 1.4 per cent," he said.
IATA also raised its 2011 average oil price assumption to USD 96 per barrel of Brent crude (up from USD 84 in December) in line with market forecasts.
Including the impact of fuel hedging which is roughly 50 per cent of expected consumption, this will increase the industry's fuel bill by USD 10 billion to a total of USD 166 billion.
Compared to levels in 2010, oil prices are now expected to be 20 per cent higher in 2011. Fuel is now estimated to represent 29 per cent of total operating costs (up from 26 per cent in 2010).Growing economies give airlines the opportunity to recover some of these added costs with additional revenues.
