Executive Briefings

In a Year of Shocks, It's the High Price of Fuel That Is Really Depressing Profit Picture for Air Transportation

The International Air Transport Association (IATA) has downgraded its 2011 airline industry profit forecast to $4bn, 54 percent lower than the $8.6bn-profit forecast in March and a 78-percent drop compared with the $18bn net profit recorded in 2010.

"Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4bn this year," said Giovanni Bisignani, IATA's director general and chief executive officer. "That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance. The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7-percent margin, there is little buffer left against further shocks."
IATA is projecting revenue of $598bn, which would yield a 0.7 percent margin.

The cost of fuel is the main cause of reduced profitability, IATA said.

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The International Air Transport Association (IATA) has downgraded its 2011 airline industry profit forecast to $4bn, 54 percent lower than the $8.6bn-profit forecast in March and a 78-percent drop compared with the $18bn net profit recorded in 2010.

"Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4bn this year," said Giovanni Bisignani, IATA's director general and chief executive officer. "That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance. The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7-percent margin, there is little buffer left against further shocks."
IATA is projecting revenue of $598bn, which would yield a 0.7 percent margin.

The cost of fuel is the main cause of reduced profitability, IATA said.

Read Full Article