New IATA Financial Forecast Predicts 2008 Profit Downturn

In a new forecast, the International Air Transport Association (IATA) revised its profit outlook for 2008 sharply downward to US$5.0 billion from the previously forecast US$7.8 billion.  It kept its outlook for 2007 unchanged at US$5.6 billion.

IATA blames the downturn largely on higher fuel prices, which it expects will add US$14 billion to the industry fuel bill next year, driving it up to US$149 billion (based on an average price of US$78 per barrel). Beyond that, IATA expects a broadening credit crunch will slow revenue growth to 4.7% and traffic growth to 4.0%.  At the same time, capacity s expected to expand in 2008 with an increase in aircraft deliveries to 1,281 (up from 1,041 in 2007).

North American carriers will see the largest fall in profitability, IATA believes, from US$2.7 billion in 2007 to US$2.2 billion in 2008. With 35% of the fleet over 25 years old, the impact of high fuel prices is greater than in other regions. Moreover, the region is at the centre of the credit crunch.

European and Asian carriers will see minor drops in profitability of US$100 million each to US$2.0 billion and US$600 million respectively.  Robust traffic growth to and within Asia is expected to partially insulate carriers from the impact of the crunch.

In other regional areas:

• The Middle East will remain stable at US$200 million supported by ambitious route expansion.

• Latin America is the only region to see profitability improve by US$100 million to breakeven in 2008.  This is largely the result of industry re-structuring.

Africa will be the only region reporting a loss - stable at losses of US$100 million last year and this.  12-19-17.

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