A prediction for the amount of profit airlines are likely to make this year has been reduced by $5 billion, to $8.6 billion.
The International Air Transport Association (IATA) originally forecast, in December 2010, that the aviation industry worldwide would make $9.1 billion profit in 2011.
The blow to airlines' prospects for the coming year follows a steep rise in the price of oil, but has been softened by an unexpected rise in traffic amid a strong economic recovery, said Giovanni Bisignani, IATA's CEO.
IATA revised how much it predicted passenger demand will grow to 5.6%, up from 5.2% in the December prediction.
Passenger yields are also likely to grow by 1.5%, said IATA, 1% more than previously thought.
Despite the upturn in demand, the price of oil is still a major concern for the profitability of airlines, said Bisignani.
“Political unrest in the Middle East has sent oil over $100 per barrel,” he said. “That is significantly higher than the $84 that was the assumption in December.”
Bisignani warned that stronger revenues will only provide a “partial offset” to higher costs: “Profits will be cut in half compared to last year and margins are a pathetic 1.4%.”
The low profit margins represent a “very thin tight rope”, he said: “The industry is performing a balancing act... There is no buffer against shocks, so everything that hits us has the potential to knock us over.”
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