Airline profits to fall almost 50 per cent in 2011: IATA

Surging oil prices in the wake of political uncertainties in the Middle East could cut down the net profits of the global airline industry by around 46 per cent compared to last year, the International Air Transport Association (IATA) said yesterday.

In its latest estimate, IATA downgraded the profit outlook of airlines for 2011 by around 5.5 per cent to $8.6 billion from the December forecast of $9.1 billion. Airlines had reported an impressive net profit of $16 billion in 2010.

For the current year, airlines expect total revenues of $594 billion and a net profit margin of 1.4 per cent of revenue.

"Political unrest in the Middle East has sent oil over $100 per barrel. That is significantly higher than the $84 per barrel that was the assumption in December," IATA director-general and CEO Giovanni Bisignani said.

"At the same time, the global economy is now forecast to grow 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," Bisignani added.

IATA's revised outlook is based on an average oil price of $96 per barrel in 2011, which is about 14 per cent higher than the earlier projection, and 20 per cent more compared to 2010 prices. This will account for around 29 per cent of total operating costs, 3 per cent up from 2010.