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Airline profits hit by high oil prices, rise in fares possible

Airline profits hit by high oil pricesHigh oil prices cost us at the pump, play into the prices of most consumer goods and will cut 2011 airline profits in half in spite of the recent growth in air travel says a new forecast out today.

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.
In February, responding to unrest in Egypt, American Airlines added fuel surcharges of as much as $5 each way on many routes with United Continental Holdings Inc. adding a $3 each-way surcharge. At the time, British Airways said they would increase the fuel surcharge they already have in place.

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

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Filed under: Business, Asia, Europe, North America, United States, Airlines, Airports, Budget Travel, News, Middle East

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