Tuesday, March 20, 2012

Global airlines profit forecast slashed as oil prices soar

GENEVA: Industry group IATA on Tuesday cut its 2012 profit forecast for the airline sector to $3.0 billion from $3.5 billion as tensions in the Gulf push fuel prices higher.

If fuel prices were to soar to $150 a barrel from about $120 at the moment, some airlines could even go bankrupt, warned International Air Transport Association chief Tony Tyler.

Although the industry group cited the European debt crisis as the main risk in December 2011, this threat has now been "taken off the table," it said.



Rather, soaring fuel prices amid supply fears spurred by concerns over Middle East supplies are now key threats to the industry.

IATA had based its initial industry earnings estimate on a forecast fuel price of $99 a barrel in 2012, but prices have now soared to about $120, with an annual average expected at around $115.

"This will push fuel to 34 per cent of average operating costs end see the overall industry fuel bill rise to $213 billion," said IATA.

But if oil prices jump to $150, "we cannot rule out the possibility of some bankruptcy, all regions will lose in this case, the most losses will be in Europe, but everywhere, there will be significant effects," said Tyler.

"Political tensions in the Gulf region increase the risk of significantly higher oil prices, the implications of which could put the industry into losses," IATA added.

Tensions between the West and Iran over Tehran's suspected nuclear weapons drive were underpinning oil prices.

Iran insists its nuclear programme is strictly for peaceful purposes, but its threat to close the Strait of Hormuz, a key oil transit, has markets on edge.

Meanwhile, IATA raised its 2011 earnings estimate for the sector to $7.9 billion from a previous forecast of $6.9 billion.

- AFP/fa

View the original article here

Source From Channel News Asia

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