KUALA LUMPUR:'' The International Air Transport Association (IATA) downgraded its airline industry outlook for 2011 to US$8.6 billion from the US$9.1 billion projected in December 2010.
IATA director general and CEO Giovanni Bisignani said on Wednesday, March 2: 'This is a 46% fall in net profits compared to the $16 billion (revised from $15.1 billion) earned by the industry in 2010.'
He said on expected industry revenues of US$594 billion, the US$8.6 billion for 2011 profit equates to a net profit margin of 1.4%.
'Political unrest in the Middle East has sent oil over US$100 per barrel. That is significantly higher than the $84 per barrel that was the assumption in December,' he added.
Bisignani said at the same time the global economy is now forecast to grow by 3.1% this year, which is a 0.5 percentage point better than predicted just three months ago.
'But stronger revenues will provide only a partial offset to higher costs. Profits will be cut in half compared to last year and margins are a pathetic 1.4%,' he said.
He said for fuel, IATA had raised its 2011 average oil price assumption to US$96 per barrel of Brent crude (up from US$84 in December), in line with market forecasts.
'Including the impact of fuel hedging, which is roughly 50% of expected consumption, this will increase the industry fuel bill by $10 billion to a total of $166 billion. Compared to levels in 2010, oil prices are now expected to be 20% higher in 2011.'' Fuel is now estimated to represent 29% of total operating costs (up from 26% in 2010),' he said.
IATA director general and CEO Giovanni Bisignani said on Wednesday, March 2: 'This is a 46% fall in net profits compared to the $16 billion (revised from $15.1 billion) earned by the industry in 2010.'
He said on expected industry revenues of US$594 billion, the US$8.6 billion for 2011 profit equates to a net profit margin of 1.4%.
'Political unrest in the Middle East has sent oil over US$100 per barrel. That is significantly higher than the $84 per barrel that was the assumption in December,' he added.
Bisignani said at the same time the global economy is now forecast to grow by 3.1% this year, which is a 0.5 percentage point better than predicted just three months ago.
'But stronger revenues will provide only a partial offset to higher costs. Profits will be cut in half compared to last year and margins are a pathetic 1.4%,' he said.
He said for fuel, IATA had raised its 2011 average oil price assumption to US$96 per barrel of Brent crude (up from US$84 in December), in line with market forecasts.
'Including the impact of fuel hedging, which is roughly 50% of expected consumption, this will increase the industry fuel bill by $10 billion to a total of $166 billion. Compared to levels in 2010, oil prices are now expected to be 20% higher in 2011.'' Fuel is now estimated to represent 29% of total operating costs (up from 26% in 2010),' he said.
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