IATA projected Tuesday that the world's airlines will earn aggregate net income of $3 billion in 2012, 14.3% below its industry profit forecast for the year issued in December and 38.8% lower than the $4.9 billion profit it predicted for 2012 last September.
The latest downgrade "is primarily driven by a rise in the expected average price of oil to $115 per barrel, up from the previously forecast $99," IATA said. "Several factors prevented a more significant downgrade: (1) the avoidance of a significant worsening of the eurozone crisis, (2) improvement in the US economy, (3) cargo market stabilization and (4) slower than expected capacity expansion."
Nevertheless, IATA DG and CEO Tony Tyler said 2012 "continues to be a challenging year for airlines. The risk of a worsening eurozone crisis has been replaced by an equally toxic risk—rising oil prices."
The $3 billion annual profit predicted by the organization would mean that the world's airlines will operate on a mere 0.5% profit margin for the year. Given this "anemic margin," Tyler warned, "it will not take much of a shock to push the industry into the red for 2012."
But there was positive news regarding last year's performance. IATA revised upwards the global industry's estimated net profit for 2011 to $7.9 billion from $6.9 billion previously. "This was primarily owing to the much better than expected performance of Chinese carriers," the organization stated.
Fuel is expected to comprise 34% of airlines' average operating costs in 2012, with total annual worldwide fuel expenses for the air transport industry reaching $213 billion this year, IATA said. Worldwide passenger traffic for 2012 is expected to rise 4.2% compared to 2011, the organization noted.
Article Source : ATW Daily News
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