The International Air Transport Association has cut its forecast for global airline profits due to a sharp rise in oil prices, warning that a spike to USD$150 per barrel could lead to losses as high as USD$5.3 billion.
In its financial forecast for 2012, IATA forecast industry profits of USD$3 billion on Tuesday, down from a previous estimate of USD$3.5 billion.
It said that several factors had prevented a bigger downgrade including the avoidance of the eurozone crisis getting significantly worse and the improvement in the US economy.
It also cited the cargo market stabilizing and the slower than expected expansion in capacity which would have reduced profits.
Tony Tyler, IATA’s director general said: "2012 continues to be a challenging year for airlines. The risk of a worsening eurozone crisis has been replaced by an equally toxic risk – rising oil prices.
"Already the damage is being felt with a downgrade in industry profits to USD$3 billion," he said
Citing the close historical link between GDP growth and airline performance, Tyler said: "With GDP growth predictions now at 2.0 percent and an anaemic margin at 0.5 percent, it will not take much of a shock to push the industry into the red for 2012."