ID :
186633
Mon, 06/06/2011 - 10:22
Auther :
Shortlink :
https://oananews.org//node/186633
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IATA SLASHES INDUSTRY PROFIT TO US$4 BLN
KUALA LUMPUR, June 6 (Bernama) -- The International Air Transport
Association (IATA) has slashed the airline industry's profit forecast for this
year by 54 per cent to US$4 billion, from US$8.6 billion, forecast in March due
to natural disasters in Japan and the unrest in Middle-East and North Africa.
Skyrocketing oil prices were also doing injustice to the industry.
"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
per cent margin, there is little buffer left against further shocks," IATA
Director-General and Chief Executive Officer Giovanni Bisignani said Monday.
The average Brent crude oil price for 2011 was now expected to hover around
US$110 per barrel, a 15 per cent increase over the previous forecast of US$96
per barrel.
For each dollar increase in the average annual oil price, airlines face an
additional US$1.6 billion in costs.
"With estimates that 50 per cent of the industry's fuel requirement is
hedged at 2010 price levels, the industry's 2011 fuel bill will rise by US$10
billion to US$176 billion," said IATA.
Fuel is now estimated to comprise 30 per cent of airline costs, more than
double the 13 per cent of 2001, it said.
"We have built enormous efficiencies over the last decade. In 2001, we
needed oil below US$25 per barrel to be profitable. Today, we are looking at a
small profit with oil at US$110 per barrel," said Bisignani.
This fuel price spike is substantially different from the one that occurred
in 2008. First, while oil inventories were low, there was substantial spare OPEC
and refinery capacity, which was not the case three years ago.
Second, the monetary expansion that fuelled a surge in financial investments
in commodities is ending which will remove a major upward pressure on fuel
prices.
Nonetheless, fuel price volatility remained one of the industry's
major challenges, he said.
On the flip side, despite high energy prices, world trade and corporate
earnings continued to improve.
As a result, global Gross Domestic Product projections increased 0.1
percentage points to 3.2 per cent, which was supporting continued growth in
demand for air transport, he added.
However, growth rates for both cargo and passenger markets were revised
downwards because of higher fuel costs.
Passenger demand was now expected to grow 4.4 per cent over the year, a full
1.2 percentage points below the 5.6 per cent previously forecast in March.
Similarly, cargo demand is expected to increase 5.5 per cent and not 6.1 per
cent as predicted earlier.
Association (IATA) has slashed the airline industry's profit forecast for this
year by 54 per cent to US$4 billion, from US$8.6 billion, forecast in March due
to natural disasters in Japan and the unrest in Middle-East and North Africa.
Skyrocketing oil prices were also doing injustice to the industry.
"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
per cent margin, there is little buffer left against further shocks," IATA
Director-General and Chief Executive Officer Giovanni Bisignani said Monday.
The average Brent crude oil price for 2011 was now expected to hover around
US$110 per barrel, a 15 per cent increase over the previous forecast of US$96
per barrel.
For each dollar increase in the average annual oil price, airlines face an
additional US$1.6 billion in costs.
"With estimates that 50 per cent of the industry's fuel requirement is
hedged at 2010 price levels, the industry's 2011 fuel bill will rise by US$10
billion to US$176 billion," said IATA.
Fuel is now estimated to comprise 30 per cent of airline costs, more than
double the 13 per cent of 2001, it said.
"We have built enormous efficiencies over the last decade. In 2001, we
needed oil below US$25 per barrel to be profitable. Today, we are looking at a
small profit with oil at US$110 per barrel," said Bisignani.
This fuel price spike is substantially different from the one that occurred
in 2008. First, while oil inventories were low, there was substantial spare OPEC
and refinery capacity, which was not the case three years ago.
Second, the monetary expansion that fuelled a surge in financial investments
in commodities is ending which will remove a major upward pressure on fuel
prices.
Nonetheless, fuel price volatility remained one of the industry's
major challenges, he said.
On the flip side, despite high energy prices, world trade and corporate
earnings continued to improve.
As a result, global Gross Domestic Product projections increased 0.1
percentage points to 3.2 per cent, which was supporting continued growth in
demand for air transport, he added.
However, growth rates for both cargo and passenger markets were revised
downwards because of higher fuel costs.
Passenger demand was now expected to grow 4.4 per cent over the year, a full
1.2 percentage points below the 5.6 per cent previously forecast in March.
Similarly, cargo demand is expected to increase 5.5 per cent and not 6.1 per
cent as predicted earlier.
