7 Jun 2011

Airline industry profit forecast cut

5:38 am on 7 June 2011

The International Air Transport Association has further cut its profit forecast for the airline sector because of rising fuel costs.

IATA expects industry profits to be $US4 billion this year, less than half the $US8.6 billion predicted in March.

The association says high fuel costs are having a big impact on profitability, after raising its latest estimate for Brent crude oil to an average $US110 per barrel this year.

''Last year the bill was $US136 billion, this year (it) will be $US176 billion, over $US30 billon (more),'' director-general Giovanni Bisignani told the BBC.

Fuel costs will represent 30% of airline expenses in 2011, according to IATA.

The BBC reports natural disasters and political unrest in the Middle East are also taking their toll on an intensely competitive industry with slim margins.

The most profitable region will be Asia-Pacific, which is expected to return $US2.1 billion in profit, only a fifth of what it made last year.

In 2010, the industry made a profit of $US18 billion.