IATA: Airline Profitability Pressured by Oil Price

The global airline industry will face a tough second half and profitability will remain under pressure amid high oil prices, a senior executive at the International Air Transport Association said Thursday, highlighting the challenges facing the industry this year amid the escalating European debt crisis and slower global economic growth.

But China remains a bright spot in the industry, IATA said, because of strong domestic demand as well as government investment in infrastructure to boost air traffic.

IATA said China is playing a key role in global aviation with one-half of the industry's aggregate profits in 2011 coming from Chinese airlines.Mr. Tyler also said demand for air freight, which typically contributes the bulk of airlines' earnings, is weak, weighed by softening international trade.

IATA, 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 estimation represents a sharp fall from the record $15.8 billion net profit for the industry in 2010.

IATA will deliver its latest forecasts for the global aviation industry early next week, as top airline executives gather in Beijing for the association's annual general meeting, with high oil prices, intensifying competition, as well as sluggish air cargo demand among the key issues they will need to tackle.

The annual general meeting comes as major airlines in the region, including Singapore Airlines, Cathay Pacific and Qantas have expressed concerns about soaring jet-fuel costs and downward pressure on demand created by Europe's debt crisis.