“Skyrocketing” oil costs due to instability in the Middle East will make 2011 a challenging year for the airline industry, IATA has warned.
Strong growth in airline traffic in January saw passenger traffic rise by 8.2% year on year with air travel volumes now up 6% from a pre-recession peak in early 2008, according to the organisation.
But “even with good news on traffic 2011 is starting out as a very challenging year for airlines” due to the rise in oil prices, CEO and director general Giovanni Bisignani said.
He also attacked a “contagion of taxes” being imposed on airlines by governments around the world.
IATA’s forecast for 2011 made in December forecast an industry profit of $9.1billion or a 1.5% net profit margin on $598 billion in revenues but that was based on an average annual oil price of $84 per barrel.
Benchmark Brent crude was trading at $112.33 a barrel at midday yesterday and for each dollar the price of oil increases, the industry’s costs rise $1.6 billion.
IATA said it plans to issue a revised 2011 forecast tomorrow.
Bisignani said: “We are all watching closely as events unfold in the Middle East. The region’s instability has sent oil prices skyrocketing.
“Our current forecast is based on an average annual oil price of $84 per barrel (Brent). Today the price is over $100. For each dollar it increases, the industry is challenged to recover $1.6 billion in additional costs.
“With $598 billion in revenues, $9.1 billion in profits and a profit margin of just 1.5%, even with good news on traffic, 2011 is starting out as a very challenging year for airlines.”
He added: “As if the rising price of oil was not challenging enough, governments are increasing the cost of mobility with a growing contagion of taxes.
“In 2010 the industry was hit with billions of dollars of new or increased taxes in the UK, Austria and Germany.
“Now we see South Africa and Iceland planning increases. Governments need to improve their finances and restart their economies.
“Mobility is a catalyst for economic growth. Governments must understand that taxing air transport out of the range of price sensitive travellers and businesses makes very little economic sense,” said Bisignani.