EUROPE & CIS: IATA halves 2011 industry profit forecast

IATA has more than halved its industry net profits forecast to US$4 billion citing higher fuel costs, unrest in the Middle East and Africa and natural disasters in Japan. The airline body has downgraded its profits expectations for the year from the $8.6 billion it had been forecasting in March. The revised profit forecast figure […]


IATA has more than halved its industry net profits forecast to US$4 billion citing higher fuel costs, unrest in the Middle East and Africa and natural disasters in Japan. The airline body has downgraded its profits expectations for the year from the $8.6 billion it had been forecasting in March. The revised profit forecast figure is less than a quarter of the $18 billion profit (revised upwards from $16 billion) the industry made in 2010. Key to the slump in profit expectations is higher fuel costs. IATA expects an average price of Brent crude oil of $110 per barrel for 2011, up from its previous forecast in March of $95. IATA now expect the industry 2011 fuel bill to jump $10 billion to $176 billion, comprising 30 per cent of airline costs. While IATA has raised its expectations for global GDP growth projections by 0.1 percentage points to 3.2 per cent, it has cut its forecast for demand growth. It now sees cargo growth of 5.5 per cent compared to the 6.1 per cent earlier predicted while passenger growth is projected more than a point lower this year at 4.4 per cent. And though it expects improved yields for the year – doubling its previous forecast for cargo and passenger yield growth to 4 and 3 per cent respectively – it notes higher fares impact pricesensitive demand and that airlines not expected to be able to offset higher costs with increased revenues.