IATA: Oil prices to cut profits - Asia Pacific carriers perform best

2012 03 23

THE International Air Transport Association (IATA) has announced a downgrade to its worldwide industry outlook for 2012 because of rising oil prices, says a communique from its Geneva headquarters.

IATA expects airlines to turn a global profit of US$3 billion in 2012 for a 0.5 per cent margin, it said. "This $500 million downgrade from the December forecast is driven by a rise in the expected average price of oil to $115 per barrel, up from the previously forecast $99," said the IATA statement.

What avoided a more severe downgrade, IATA said, was greater optimism over the Eurozone debt crisis, improvement in the US economy, cargo market stabilisation and slower than expected capacity expansion.

Said IATA director general Tony Tyler: "The risk of a worsening Eurozone crisis has been replaced by an equally toxic risk - rising oil prices."

IATA said cargo markets stabilised at low levels in the fourth quarter of 2011. The pattern of rising sea freight and low level of air cargo is linked to Asian economies buying bulk commodities while western consumer confidence is weak. Reduced pessimism among purchasing managers is expected to support a moderate upturn in air cargo during the second half, said the statement.

Asia Pacific carriers did best. Better than expected performance in 2011, particularly by the Chinese carriers, saw an upward revision of 2011 profits to $4.8 billion, from the previous estimate of $3.3 billion.

For 2012, the region's airlines are expected to again deliver the largest absolute profit - $2.3 billion - which is $200 million more than estimated in December. Higher fuel costs will more than halve profits this year, but the region's relatively strong economies will continue to generate more rapid growth in travel and cargo than others, IATA said.

While a major deterioration of the Eurozone crisis has been averted, many European economies are in deep recession which will lead to continued weakness in both the cargo and passenger business. At the same time air travel is being hit by taxation and the cost of the EU carbon tax, IATA said.

North American carriers are expected to deliver a profit of $900 million, down from the previously forecast $1.7 billion. Airlines in this region will see the smallest deterioration among the major regions, as a result of the very small increases in capacity expected, IATA said.

Middle East carriers are expected to see profits of $500 million, up from the previously forecast $300 million. Latin American profits are expected to be $100 million, unchanged from the previous forecast. African carriers are still expected to experience losses of $100 million, unchanged from the previous forecast.

Source Shipping Gazette - Daily Shipping News

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