The world’s airlines will make a bigger than expected combined profit of $6.9bn in 2011, according to their main representative body, but it predicted the sector’s earnings would then fall to $4.9bn next year because of the poor economic outlook.
The International Air Transport Association raised its closely watched airlines’ net profit forecast for 2011 from $4bn to $6.9bn because of higher than anticipated passenger traffic and more efficient use of aircraft.
However, Iata warned airlines’ prospects for 2012 were deteriorating, with combined profit set to fall to $4.9bn, because debt-burdened western economies were braced for weak economic growth.
“It looks like we are headed for another year in the doldrums,” said Tony Tyler, Iata’s director-general. “With business confidence declining, it is difficult to see any potential for significant profitable growth.” He said European airlines would be worst hit in 2012, because of the region’s sovereign debt crisis.
Mr Tyler called on the European Union to suspend plans to bring airlines within the EU’s carbon emissions trading scheme from January, and instead focus on devising a global solution to tackle the sector’s pollution. Airlines are facing a bill of €1.1bn under the EU scheme.
Air travel is closely correlated to gross domestic product, and Iata’s forecasts are based on global economic growth of 2.5 per cent in 2011 and 2.4 per cent in 2012.
Mr Tyler said whenever GDP growth slowed below 2 per cent the airlines lost money. “We will be perilously close to that level through 2012,” he added. “Any shock has the potential to put us in the red.”
After running up large losses in 2008 and 2009 after the global financial crisis, airlines made a combined net profit of $18bn in 2010.
But in June, Iata slashed airlines’ profit forecast for 2011 from $8.6bn to $4bn because of rising oil prices, political unrest in the Middle East and the Japanese earthquake.
The forecast has now been raised to $6.9bn, partly because passenger traffic rose by a stronger than anticipated 6 per cent in the first six months of the year, compared with the same period in 2010. European airlines gained the most from the higher traffic, with the weak euro boosting the eurozone’s tourism and exports.
Profit should also be boosted in 2011 by the way in which airlines made more efficient use of their aircraft in the second quarter compared with the first. The industry’s load factor, which measures the level of passenger occupancy on aircraft, stood at 83.1 per cent in July.
Iata expects the 2011 average price of Brent crude to be $110 a barrel, which would be 39 per cent higher than last year, and mean that airlines’ fuel bill should represent 30 per cent of the industry’s costs.
Another negative factor for airlines is stagnation in freight. Iata cut its forecast for growth in freight traffic from 5.5 per cent to 1.4 per cent in 2011 compared with last year.
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