Airline sector profit forecast slashed

Airline body IATA on Wednesday cut its 2014 earnings forecast for the sector to US$18.7 billion, after oil prices soared over the Ukraine crisis.

The new figure is a decrease of $1 billion from the previous forecast issued in December, said the International Air Transport Association.

It blamed political tensions in countries including Ukraine, saying they were expected to drive oil prices to an average $108 per barrel, or $3.50 more than expected.

But the extra $3 billion added to the industry's fuel bill is expected to be largely offset by stronger demand, especially for cargo, thanks to a strengthening global economy, IATA said.

And while profits are set to be dented by fuel costs, overall industry revenues look likely to rise to $745 billion, or $2 billion more than previously projected, it said.

As a result, this is a "tweak and the overall forecast is still very aligned to our December thinking," said IATA chief Tony Tyler.

If the sector delivers the new earnings forecast, that would still mark the industry's highest-ever profit, according to IATA.

In 2012 airlines made $6.1 billion, while last year ended with a profit of $12.9 billion.

"In general, the outlook is positive. The cyclical economic upturn is supporting a strong demand environment. And that is compensating for the challenges of higher fuel costs related to geo-political instability," Mr Tyler said.

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