IATA lowers 2011 industry profit forecast to $8.6 billion on rising oil prices

Citing rapidly rising oil prices, IATA on Wednesday trimmed its 2011 earnings forecast for the world's airlines by 5.5% to $8.6 billion from $9.1 billion projected in December. IATA estimates that airlines earned $16 billion in 2010.

"Political unrest in the Middle East has sent oil over $100 per barrel," IATA DG and CEO Giovanni Bisignani noted, adding this is "significantly higher than the $84 per barrel that was the assumption in December." For the full year, Brent crude now is expected to average $96 per barrel, which will increase the industry's fuel bill by $10 billion to $166 billion.

Helping to mitigate the full impact of higher fuel cost is stronger than expected GDP growth, now forecast to rise 3.1% this year compared to 2010, versus a 2.6% forecast in December. This caused the organization to revise upward its annual passenger traffic growth projection to 5.6% from 5.2% and its cargo traffic forecast upward to 6.1% from 5.5%, with a combined forecast of 5.7% TKP growth.

By region, the greatest impact will be felt in the Asia/Pacific region; carriers there are now expected to post earnings of $3.7 billion this year, down from a forecast of $4.6 billion in December and estimated earnings of $7.7 billion in 2010. The 2011 earnings outlook for North American airlines is unchanged at $3.2 billion, down from $4.7 billion in 2010 (IATA previously estimated 2010 earnings for the carriers at $5.1 billion).

European airlines are projected to earn $500 million this year, which actually represents an improvement compared to the previous forecast of $100 million. However, IATA now says the carriers earned $1.4 billion last year, whereas it previously estimated their 2010 income at just $400 million.

Middle East carriers will largely shrug off the impact of the civil unrest in the region, returning a profit of $700 million this year, raised from the prior estimate of $400 million. However, IATA said this will be down from the estimated $1.1 billion the airlines earned last year. In December, it estimated their 2010 earnings at $700 million. Latin American carriers saw their earnings forecast reduced to $300 million from a previous estimate of $700 million. 2010 earnings are now put at $1 billion, reduced from $1.2 billion in December.

African carriers are expected to breakeven, unchanged from the previous forecast but down from the estimated $100 million they earned in 2010.