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165394
Wed, 03/02/2011 - 18:11
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https://oananews.org//node/165394
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IATA CUTS 2011 PROFIT FORECAST TO US$8.6 BLN DUE TO RISING FUEL PRICE
KUALA LUMPUR, March 2 (Bernama) -- The International Air Transport
Association (IATA) has downgraded the industry's profit outlook in 2011 to US$8.6 billion from US$9.1 billion previously due to rising crude oil price.
The new estimate is a 46 percent fall in net profits compared to the US$16 billion (revised from US$15.1 billion) earned by the industry in 2010.
On expected industry revenues of US$594 billion, the US$8.6 billion 2011 profit equates to a net profit margin of 1.4 percent.
"Political unrest in the Middle East has sent oil over US$100 per barrel.
"That is significantly higher than the US$84 per barrel that was the assumption in December," IATA director-general and chief executive officer Giovanni Bisignani said in a statement Wednesday.
At the same time, the global economy is now forecast to grow by 3.1 percent 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 percent," he said.
IATA also raised its 2011 average oil price assumption to US$96 per barrel of Brent crude (up from US$84 in December) in line with market forecasts.
Including the impact of fuel hedging which is roughly 50 percent of expected consumption, this will increase the industry's fuel bill by US$10 billion to a total of US$166 billion.
Compared to levels in 2010, oil prices are now expected to be 20 percent higher in 2011. Fuel is now estimated to represent 29 percent of total operating costs (up from 26 percent in 2010).
Growing economies give airlines the opportunity to recover some of these added costs with additional revenues.
For example, since early 2009, rising oil prices added 25 percent to unit costs while average fares (excluding surcharges) rose 20 percent.
But in 2011, higher revenues were not expected to be sufficient to prevent the rise in oil prices from causing profits to shrink by 46 percent from 2010 levels, Bisignani added.
As for regional outlook, he said Asia-Pacific carriers were expected to deliver the largest collective profit of US$3.7 billion and the highest operating margins of 4.6 percent.
This is down substantially from the US$7.6 billion that the region’s carriers made in 2010 and from the previously forecast US$4.6 billion for 2011.
"While the strong economic growth in the region is still driving
profitability, inflation fighting measures in China are slowing trade and air cargo demand," he said.
The key reason for the downgrade from December’s forecast was that the region was more exposed to higher fuel prices due to relatively low hedging on average, he added.
Association (IATA) has downgraded the industry's profit outlook in 2011 to US$8.6 billion from US$9.1 billion previously due to rising crude oil price.
The new estimate is a 46 percent fall in net profits compared to the US$16 billion (revised from US$15.1 billion) earned by the industry in 2010.
On expected industry revenues of US$594 billion, the US$8.6 billion 2011 profit equates to a net profit margin of 1.4 percent.
"Political unrest in the Middle East has sent oil over US$100 per barrel.
"That is significantly higher than the US$84 per barrel that was the assumption in December," IATA director-general and chief executive officer Giovanni Bisignani said in a statement Wednesday.
At the same time, the global economy is now forecast to grow by 3.1 percent 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 percent," he said.
IATA also raised its 2011 average oil price assumption to US$96 per barrel of Brent crude (up from US$84 in December) in line with market forecasts.
Including the impact of fuel hedging which is roughly 50 percent of expected consumption, this will increase the industry's fuel bill by US$10 billion to a total of US$166 billion.
Compared to levels in 2010, oil prices are now expected to be 20 percent higher in 2011. Fuel is now estimated to represent 29 percent of total operating costs (up from 26 percent in 2010).
Growing economies give airlines the opportunity to recover some of these added costs with additional revenues.
For example, since early 2009, rising oil prices added 25 percent to unit costs while average fares (excluding surcharges) rose 20 percent.
But in 2011, higher revenues were not expected to be sufficient to prevent the rise in oil prices from causing profits to shrink by 46 percent from 2010 levels, Bisignani added.
As for regional outlook, he said Asia-Pacific carriers were expected to deliver the largest collective profit of US$3.7 billion and the highest operating margins of 4.6 percent.
This is down substantially from the US$7.6 billion that the region’s carriers made in 2010 and from the previously forecast US$4.6 billion for 2011.
"While the strong economic growth in the region is still driving
profitability, inflation fighting measures in China are slowing trade and air cargo demand," he said.
The key reason for the downgrade from December’s forecast was that the region was more exposed to higher fuel prices due to relatively low hedging on average, he added.
