Airline Group Lowers 2008 Profit Forecast

The world's airlines received some much-needed good news this week, as the International Air Transport Association raised its profit forecast for 2007, to $5.6 billion. That's up a half-billion from its June numbers.

However -- as is almost always the case when talking airlines -- there's some discouraging news, as well. IATA also lowered its forecasted numbers for 2008, from $9.6 billion to $7.8 billion. Overall, that's a drop of $1.3 billion for the two-year period than earlier forecasts.

Blame the lower numbers on high fuel prices and the shaky credit markets, IATA told Thompson Financial.

"While we are more optimistic for 2007, the continuing high price of oil combined with turmoil in credit markets is a cause for concern in 2008," said IATA director general and CEO Giovanni Bisignani (shown above, right.) "The impact of the credit crunch puts some question marks over the industry's performance next year and the continuing high price of fuel will become more difficult to mitigate with efficiency gains."

The airline industry will be characterized by "a substantial shift in relative regional performance, primarily driven by capacity increases" in the year ahead, Bisignani added.

IATA forecasts a net profit of $2.7 billion for North American carriers for 2007, noting that's "the highest among the major regions."

On the other hand, expected growth in the Asia-Pacific markets hasn't been as strong as originally planned. IATA says the result is "poorer yields from Asia-Pacific carriers combined with sluggishness in cargo markets saw a decline in absolute profits from $1.2 bln in 2005 to an expected $700 mln in 2007."

European carriers improved profitability for 2007, from $1.6 billion in 2005 to a forecasted $2.1 billion this year. Profitable long-haul markets are seen as the prime motivating factor there.

FMI: www.iata.aero