Airlines' profit losing altitude

Singapore - The International Air Transport Association (Iata) has downgraded its expectations for aviation industry profits for 2011 by 54%.

Iata said on Monday that it expects airlines will make a total profit of $4bn in 2011, compared to an earlier estimate of $8.6bn.

Iata CEO Giovanni Bisignani said the new estimates are primarily caused by an increase in oil prices this year.

“The average oil price for 2011 is now expected to be $110 per barrel of Brent. This represents an increase of 15% on the previous forecast of $96. For each dollar increase in the average annual oil price, airlines face an additional $1.6bn in costs.”

The organisation represents 230 of the world's biggest airlines, which between them are responsible for 93% of global commercial air traffic.

Bisignani said Iata expects overall capacity for airlines (both cargo and passenger) to expand by 5.8% in 2011.

“However, the gap between capacity expansion and demand will increase by 1.1 percentage points from 0.3 percentage points. This also constitutes lower profit expectations.”

Tony Tyler, head of Cathay Pacific, will replace Bisignani as head of Iata from July 1.