Flying Not Set to Soar As Oil Price Impacts on Forecast ; AVIATION

Airline industry body IATA yesterday slashed its forecast for industry profits in 2008, warning that the spiralling cost of fuel and the impact of the credit crunch would reverse expected growth.

The International Air Transport Association (IATA) reduced its forecast for 2008 industry profits to EUR5 billion as oil prices approach EUR100 a barrel.

In September, it had forecast EUR7.8 billion in profits next year but that was based on oil at just EUR70 a barrel.

“A favourable economic environment and effective efficiency measures helped mitigate the impact of high fuel prices and underpinned stability improvements. With the credit crunch, that is changing,” said IATA director general Giovanni Bisignani in remarks prepared for delivery at a briefing in Geneva.

“The peak of the business cycle is over, and we are still EUR190 billion in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall,” he said.

The industry body confirmed its forecast for industry profits in the current year of EUR5.6 billion.

International carriers, especially in Europe, had been concerned about US credit market turmoil because of the potential impact this would have on financing conditions and corporate travel.

Premium travellers, usually business customers, account for 25 per cent of traffic aboard the top five European airlines on transatlantic flights, compared with 15 per cent for the leading US carriers, according to IATA data.

IATA represents 280 airlines, covering 95 per cent of international air traffic.

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