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Airline profits hit by high oil prices, rise in fares possible
In a revised profit forecast, International Air Transport Association said it was downgrading its airline industry profit outlook for 2011 to $8.6 billion from the $9.1 billion it had estimated just last December.
"This is a 46 percent fall in net profits compared to the US$16 billion earned by the industry in 2010," IATA said in a statement.
The new forecasts were based on oil priced at a average of $96 per barrel of Brent crude over the year, compared to $84 a barrel used in the December forecast. The price of oil spiked to $115 today, shy of last weeks high of $120.
Now, with this latest announcement signaling an approaching hit on profits, airline shareholders are already in pain. The 2008 spike in oil prices sent airlines into a 2-year profit tailspin.
Flickr photo by L.C.Nottaasen