Global airline profits hit by sky-high fuel costs

August 3, 2011 - 7:14 AM

GENEVA (AP) — Sky-high fuel prices have hit the profits of the world's airlines though Europe's carriers recovered after suffering last year from a volcanic ash cloud that brought traffic to a standstill, the industry's main lobby group said Wednesday.

The International Air Transport Association said early results from a sample of airlines globally show they will post $1.04 billion in profits for the second quarter of 2011, a big drop from the $2.88 billion in profits for the same quarter a year earlier.

"The sample is too small as yet to come to clear conclusions but Asian airlines appear to have been under (the) most pressure, whereas European airlines have improved operating profits (partly because second-quarter 2010 results were hit by the ash cloud last year)," the Geneva-based group said.

Along with Europe's recovery, another bright spot for airlines is that air travel volume overall looks to be expanding at a rate of 4-5 percent a year, IATA said, though air travel and freight dipped lower in June.

But IATA said those sources of revenue have been more than offset by the rise in jet fuel prices above $130 a barrel on worries about supply, which partly reflects the ongoing civil war in Libya.

Other negative factors cited include stagnant air freight markets and recent worries over government debt and inflation. IATA also said the recent sharp fall in business confidence is a cause for concern as business travel has been a major growth factor due to the higher-priced tickets that airlines can charge.

Based on the average fare each passenger pays per mile, gains in airline revenue are slowing and have not yet recovered to pre-recession levels outside the United States, IATA said.

It said these broader worries have weighed down airlines' share prices by 15 percent so far this year.