The Hindu Business Line : Global airlines may report lower profits in 2008

The global airline industry is likely to record a profit of $5 billion during 2008, down from the earlier estimate of $7.8 billion, the International Air Transport Association (IATA) said on Wednesday. IATA has, however, not changed the forecast that the industry would report a net profit of $5.6 billion during 2007.

“The spike in fuel prices is expected to add $14 billion to the industry’s fuel bill, while the broadening impact of the credit crunch is expected to slow revenue growth to 4.7 per cent providing much less of a cushion against high fuel costs. Besides, traffic growth is likely to be around 4 per cent, while capacity expansion is expected to accelerate during 2008 with about 1,281 aircraft being added against 1,041 aircraft delivered during the previous year,” IATA Chief Economist, Mr Brian Pearce, told newspersons at a media briefing here.

During 2008, Asian carriers are likely to see a “minor drop” in profitability of about $100 million to touch around $600 million. “Robust traffic growth to and within Asia is expected to partially insulate carriers from the impact of the crunch,” Mr Pearce felt.

Similarly, North American carriers would see the largest fall in profitability and are expected to report a profit of around $.2.2 billion, down from $.2.7 billion recorded previously, he said adding that with 35 per cent of the fleet being over 25 years old, the impact of the high fuel prices is greater for North American carriers than for others. Addressing the gathering, IATA Director-General, Mr Giovanni Bisignani, outlined the steps that were being taken by IATA to help the industry. “We are driving change in critical areas. Our $310 billion settlement system is the financial backbone of the industry and the $2.3 billion in user charges savings contribute to the industry’s effort to move to profitability,” he said.