Global airlines cut their 2011 profit forecast by more than half on Monday as high oil prices and turmoil in Japan, North Africa and West Asia weigh on the industry's recovery.
The International Air Transport Association (IATA), which represents most global carriers, said it expected industry profits of $4 billion in 2011, down from a previous forecast of $8.6 billion. That would down more than three-quarters from the industry’s estimated 2010 profit, which was raised to $18 billion from $16 billion.
“The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel,” the IATA’s director general and CEO Giovanni Bisignani, told the group's annual general meeting here.
“But with a dismal 0.7% margin, there is little buffer left against further shocks,” he said.
Airlines had been bracing for lower 2011 forecasts at this week’s major conference as fears grow over the global economy. IATA issued a warning that capacity was set to expand 5.8% in 2011, outstripping a 4.7% increase in demand. The 1.1% point gap is sharply higher than 0.3% previously forecast.
The association also warned of a looming trade war if Europe moves ahead with plans to force airlines to join a planned Emissions Trading Scheme (ETS), which would force carriers to buy permits for each tonne of carbon dioxide they emit above a certain cap.
The plan is meant to tackle growing emissions from the $500 billion aviation industry, which is responsible for about 2% of greenhouse gas pollution by humans.
Representatives from developing countries slammed the proposed rules as unfair.
“Indian airlines do not have the same level of sophistication or maturity in trading of carbon credits,” said Vijay Mallya, chairman of Kingfisher Airlines. “Therefore any such new policy or levy on Indian carriers flying to Europe would be unfair.”
Singapore’s deputy prime minister Tharman Shanmugaratnam said a global approach to emission control was needed.
“In addressing climate change, we should harmonise measures at an international level so as to ensure a level playing field for all, as well as minimise multiple cost layers from unilateral localised emissions trading schemes and environmental taxes,” he said.