Forecast 2011 airline industry net profits have dropped from US$9.1 billion to US$8.6 billion, a 46% decrease on estimated 2010 profits of US$16 billion.
- Economic growth and air transport demand are expected to remain close to trend this year but fuel costs have risen sharply.
- The forecast is based on jet kerosene prices averaging U$112 a barrel, up 23% from 2010; current levels are even higher.
Until the recent surge in fuel prices, rising costs had been offset by increased revenues. This may become more difficult.
Over the last 12 months, passenger and freight load factors had been close to record highs. However, both are now slipping as capacity returns
Read full financial forecast report for March 2011 (pdf)
- International air travel markets are now 6% larger than their pre-recession peak.
- Rising capital and consumer goods sales has prompted renewed growth in air freight markets.
- World GDP is forecast to rise 3.1% in 2011, up from the 2.6% forecast in December.
- Passenger markets are forecast to grow 5.6% this year and cargo by 6.1%.
- Business confidence and corporate profits are strong; international trade and investment continues to expand.
- This is expected to continue boosting business travel in 2011, albeit at a slower pace than in 2010.
- Capacity is expected to increase by 6% in 2011. Demand is expected to rise by 5%, so load factors will slip further.
- Yields are not expected to be able to rise sufficiently to offset the rise in fuel costs. Profit margins will be squeezed.
- If rising energy costs significantly weaken economic growth, this forecast for airline profits in 2011 would deteriorate substantially