IATA downgrades airline industry outlook to $8.6b
The International Air Transport Association (IATA) downgraded its airline industry outlook for 2011 to $8.6 billion from the $9.1 billion it estimated in December 2010.
This is a 46% fall in net profits compared to the $16 billion (revised from $15.1 billion) earned by the industry in 2010. On expected industry revenues of $594 billion, the $8.6 billion 2011 profit equates to a net profit margin of 1.4%.
“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,” said Giovanni Bisignani, IATA’s Director General and CEO.
“At the same time the global economy is now forecast to grow by 3.1% 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%,” he added.
Middle East carriers are expected to return a profit of $700 million. This is considerably better than the $400 million previously forecast, but down from the $1.1 billion profit that the region posted in 2010.
Political instability in the region is expected to take its toll in Egypt, Tunisia and Libya which combined account for about 20% of the region’s international passenger traffic. This is balanced by the Gulf area which benefits from economic activity related to high oil prices and whose hubs continue to win long-haul market share. Load factors have also improved significantly for these airlines, as new capacity is being added at a slower pace than demand increases.