Airlines Group Warns Over Rising Oil Prices
The global aviation industry could run up losses of over $5 billion this year if oil prices spike by more than anticipated in light of the tensions building up over Iran's nuclear program, the industry's trade group said Tuesday.
The International Air Transport Association, or IATA, says it now expects earnings will likely decline to $3 billion in 2012. That's down from December's forecast of $3.5 billion, based on an expectation that oil prices will average $115 a barrel. At present, the benchmark New York rate is trading at nine-month highs around $107 a barrel.
Tony Tyler, IATA's chief executive, said the industry's diminished profit forecast for 2012 could turn to losses of more than $5 billion if oil prices spike to $150 a barrel due to Western tensions with Iran.
"I must emphasize that the industry is fragile," he said, pointing to global growth forecasts of 2 percent for this year. "Historically, if GDP falls below 2 percent, the industry returns a collective loss. So it would not take much of a shock to turn our very modest profit projection to a net loss."
"Indeed that shock could be oil," he added. "Such a shock would link to a fall in GDP growth to 1.7 percent and we could see losses in excess of $5 billion."