Airline profit to head south this year

AIRLINES are expected to make a much smaller profit this year over last year, as a result of huge capacity increase and higher jet fuel price.

International Air Transport Association (IATA) is forecasting a global airline profit of US$9.1 billion this year, after the industry is slated to end last year with US$15.1 billion in profit. As it is, the US$9.1 billion forecast is based on last year’s jet fuel price averaging an estimated US$79 per barrel. IATA expects this year’s jet fuel price to average US$84 per barrel.

IATA director-general and CEO Giovanni Bisignani said just a dollar increase per barrel of oil would result in US$1.6 billion in additional cost for airlines.

Fuel accounts for 27 per cent of the total operating costs of airlines. Even though airlines impose fuel surcharges, those only covered up to 30 per cent of oil cost, with the heavy burden continuing to rest with the airlines, according to IATA spokesperson Anthony Concil.

Capacity, meanwhile, is expected to grow seven per cent this year, with 1,400 new aircraft delivered.

Of the anticipated US$9.1 billion profit, Asian airlines are expected to make US$4.6 billion, North American US$3.2 billion, Latin America US$700 million, the Middle East US$400 million and European a paltry US$100 million.

“Europe is the sick region of the aviation market,” said Bisignani.

Asia is the star, now and the future. “By 2014, one billion people will travel by air in Asia-Pacific. That’s 30 per cent of the global total and a four percentage point increase from the 26 per cent it represented in 2009,” he said during a media briefing yesterday.

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