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AUSTRALIA-AVIATION-BUSINESS-EARNINGS-IATA
Surging oil prices to hurt airlines’ profits: IATA
SYDNEY, May 31, 2018 (BSS/AFP) – Surging oil prices are forecast to dent
airlines’ profits and could significantly hurt their bottom lines next year,
the boss of airline industry group IATA warned Thursday.
Oil has been trading at 3.5-year highs recently amid concerns about supply
disruptions caused by the United States’ decision to quit the Iran nuclear
deal and unrest in Venezuela.
The International Air Transport Association (IATA) is set to release a
lower profit forecast for the global airline industry at its annual meeting
in Sydney next week, with rising fuel costs a key factor.
“Significantly, probably next year,” the group’s chief executive Alexandre
de Juniac told reporters in Sydney of the scale of the impact on carriers’
profits.
IATA in December tipped record industry profits of more than US$38 billion
for this year when the price of a barrel of crude was at US$60.
Since then, the price has steadily risen towards US$80, prompting the
revised outlook, although profits were “still positive” despite the pressure
on earnings, de Juniac said.
“If it continues above US$80, then it will bite hard… on the results of
the airlines,” he added.
“We see more forces pushing prices up than down.”
Higher oil prices could see airlines pass the buck to passengers through
increased fares, but de Juniac said that had yet to occur in a highly
competitive market.
He also cautioned that the aviation sector was likely to be at the peak of
its profitability cycle after nine years of gains, with infrastructure and
labour costs as well as higher taxes also weighing.
Despite the concerns, the IATA chief said a possible fall in profits could
be less steep than in previous boom-bust cycles as carriers had
“significantly improved” their resilience in recent years.
“The airlines have been restructured and re-engineered properly to have
stronger (profit and loss) and stronger balance sheets,” he said.
IATA represents 280 airlines that make up 83 percent of global air
traffic.
BSS/AFP/HR/1335