IATA raises MidEast airlines' profit forecast

Middle East carriers are expected to see profits of $500m this year, up from the previous forecast of $300m, the International Air Transport Association (IATA) said on Tuesday. The region is set to buck the worldwide trend as IATA forecast a global profit downgrade of $500m to $3bn primarily due to rising oil prices. In the Middle East, IATA said financial performance was already seen to be better than previously expected in 2011, with an upgrade from $400m to $1bn. It added that in the passenger business, load factors have improved by a slowdown in the introduction of new capacity, and long haul markets have been relatively robust. Globally, IATA said it expects airlines to turn a profit of $3bn in 2012 for a 0.5 percent margin. The forecast downgrade compared to the December figure is primarily driven by a rise in the expected average price of oil to $115 per barrel, up from the previously forecast $99, it said in a statement. "2012 continues to be a challenging year for airlines. The risk of a worsening Eurozone crisis has been replaced by an equally toxic risk - rising oil prices. Already the damage is being felt with a downgrade in industry profits to $3bn," said Tony Tyler, IATA’s Director General and CEO. IATA said its new oil price forecast will push fuel to 34 percent of average operating costs and see the overall industry fuel bill rise to $213bn. Political tensions in the Gulf region increase the risk of significantly higher oil prices, the implications of which could put the industry into losses, IATA added. Globally, passenger demand is expected to grow by 4.2 percent this year, which is 0.2 percent ahead of the December forecast. IATA said all regions will see reduced profitability in 2012 compared to 2011, and Europe and Africa seeing losses of $100m and $600m respectively. "Today’s industry situation reinforces the need for governments to take a more strategic approach to aviation with competitiveness-enabling policies that will deliver broad economic benefits," added Tyler. "This has been tried, tested and proven by many governments in Asia and the Middle East. Europe, India, the US and others should take note.”