Airline profits nosedive after high fuel prices

High oil prices are to blame for a slide in airline profits, claims the International Air Transport Association (IATA). The trade body has slashed its prediction for 2011 profits to […]

Register now!

By Vicky Ellis

High oil prices are to blame for a slide in airline profits, claims the International Air Transport Association (IATA).

The trade body has slashed its prediction for 2011 profits to $4billion, almost an 80% drop from the net profit in 2010 of $18billion (£11bn).

Giovanni Bisignani, IATA’s Director General and CEO attributed this to sharp rise in oil prices, with fuel now roughly 30% of airline costs, more than double that of ten years ago.

Global crises were also a factor according to Mr Bisignani, who referred to the natural disasters in Japan, unrest in the Middle East and North Africa.

He said: “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. 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% margin, there is little buffer left against further shocks.”

Prices of oil at $110 per barrel played their part in this, added the IATA boss, compared with 2001 when the industry needed oil below $25 per barrel to be profitable.

The forecast suggested that European carriers will deliver a $500 million (£300m) profit, down from $1.9 billion in 2010.