A US Airways jet takes off at Logan Airport in Boston, Massachusetts, on November 15. World airline profit forecasts for 2008 have been cut by a third to US$5 billion. - contributed
The airline industry body, International Air Transport Association (IATA), slashed its forecast for industry profits in 2008 on Wednesday, warning that the spiralling cost of fuel and the impact of the credit crunch would reverse expected growth.
IATA reduced its forecast for 2008 industry profits by one third to US$5 billion as oil prices approach US$100 a barrel.
In September, it had forecast US$7.8 billion in profits next year, but that was based on oil at just US$70 a barrel.
"A favourable economic environment and effective efficiency measures helped mitigate the impact of high fuel prices and underpinned stability improvements. With the credit crunch, that is changing," IATA Director General Giovanni Bisignani told a briefing in Geneva.
"The peak of the business cycle is over, and we are still US$190 billion in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall," he said.
Blip rather than a recession
Yet IATA chief economist Brian Pearce added: "This is a blip rather than a recession."
The industry body confirmed its forecast for industry profits in the current year of US$5.6 billion.
International carriers, especially in Europe, had been concerned about U.S. credit market turmoil because of the potential impact this would have on financing conditions and corporate travel.
Premium travellers, usually business customers, account for 25 per cent of traffic aboard the top five European airlines on transatlantic flights, compared with 15 per cent for the leading U.S. carriers, according to IATA data.
The industry body said that North American carriers would see the largest profitability squeeze in 2008, while European and Asian airlines would experience more minor profit declines.
Overall, it estimated that high energy prices would add US$14 billion to the industry's fuel bill in 2008, driving it up to US$149 billion.
IATA represents 280 airlines, covering 95 per cent of international air traffic.
- Reuters
