IATA cuts industry profit

Source: Flightglobal.com
This story is sourced from Flightglobal.com

IATA has cut another $500 million from its industry profit forecast for this year, bringing its expectations down to $4.5 billion, after revising its figures for a second time to take into account slowing economic growth and high oil prices.

In September 2006 the airline organisation had optimistically predicted a $7.6 billion profit for the industry this year but slashed this figure to $5 billion last December.

While IATA director general Giovanni Bisignani says the organisation still expects a “positive bottom line” of $4.5 billion, he adds: “It’s turning out to be a very tough year.”

Fuel represents nearly one-third of operating costs, he says, generating a total bill of $156 billion.

Efficiency gains – including a 64% improvement in labour productivity and 18% drop in non-fuel unit costs since 2001 – have helped offset oil prices. But Bisignani states that further efficiency gains are “much more difficult to achieve” and adds: “The broadening impact of the US credit crunch has brought buoyant consumer confidence to an abrupt end.”

IATA adds that the delivery of new aircraft, increased competition from the new US-European ‘open skies’ environment, and difficulty in selling assets during the current financial downturn will put further pressure on airlines’ profits.