Estimate of airline industry profits lowered by higher oil prices

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Higher fuel costs and turmoil in the Middle East has prompted a global airline trade group to lower projected profits for the industry in 2011.

The International Air Transport Assn. had estimated in December that the global industry would generate $9.1 billion in profits in 2011. The trade group downgraded that estimate Wednesday to $8.6 billion from total revenues of $594 billion.

Although demand for airline tickets has continued to increase in the past few months, it will not totally offset the higher cost for fuel, which typically represents 25% to 30% of an airline’s overall expenses.

‘Political unrest in the Middle East has sent oil over $100 per barrel,’ said Giovanni Bisignani, the trade group’s director general. ‘That is significantly higher than the $84 per barrel that was the assumption in December.’

-- Hugo Martin