Airlines’ profitability pressured by high oil prices

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Oil prices are high, although moderating somewhat from recent peaks

logo 3 The profitability of the global airline industry will remain under pressure amid high oil prices, an senior executive at the International Air Transport Association said Thursday. The agency also outlined the challenges facing the industry as the European debt crisis continues and global economic growth falters.

Despite strong passenger demand for air travel, the industry’s profitability “remains razor thin” amid high oil prices.

“Oil prices are high, although moderating somewhat from recent peaks,” director general of IATA, Tony Tyler said, adding that he expects rising demand for fuel-efficient aircraft to result.

Air traffic growth is expected to be sustained in China despite slower economic growth. China’s government earlier this year revised down its economic growth forecast for the year to 7.5% from 8%.

China is playing a key role in global aviation with Chinese airlines accounting for half of the industry’s global net profit in 2011, IATA said in a statement.

The industry lobby group, which represents about 240 airlines comprising 84% of scheduled international traffic, in March cut its forecast for airlines’ net profit for this year by 14% to $3 billion from $3.5 billion, citing higher oil prices. This estimate is down from net profit of $7.9 billion in 2011 and a sharp fall from the record $15.8 billion net profit for the industry in 2010.

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