SINGAPORE – Airline profits will likely plummet this year because of natural disasters, political violence and higher fuel prices, an industry group said Monday.
Airlines will probably earn about $4 billion in 2011, down from $18 billion last year, the International Air Transport Association said. IATAs previous forecast in March estimated 2011 profits of $8.6 billion.
Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations, IATA Director General Giovanni Bisignani said in a statement. 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.
Higher fuel costs – crude rose to $115 last month from $84 in February – are the largest obstacle to airline profitability, the association said. The industrys fuel bill will likely rise by $10 billion this year to $176 billion and fuel now accounts for 30 percent of an airlines costs, up from 13 percent in 2001, the association said.
Airlines are counting on continued growth in the global economy to help offset higher oil prices. Passenger numbers will likely increase 4.4 percent this year while cargo should grow 5.5 percent, though both forecasts are below IATAs March estimates.
Airline executives criticized a new European Union plan that would make carriers pay for carbon dioxide emissions that exceed a limit. The Emissions Trading Scheme is scheduled to begin on January 1 and will likely lead other countries and jurisdictions to implement similar taxes over the next few years, said Tim Clark, president of Dubai-based Emirates Airline, the worlds largest carrier by international passenger traffic.
The emission targets are very difficult. Its an incredibly big task, Clark said during a panel discussion after IATAs general assembly meeting in Singapore.