WASHINGTON - Higher oil prices and credit-market turmoil prompted an international aviation trade group to sharply lower its 2008 profit outlook yesterday, with U.S. carriers expected to be hit the hardest.
The International Air Transport Association estimated a global industry profit of $5 billion in 2008, down from previous guidance of $7.8 billion. The trade group maintained its forecast of a $5.6 billion profit for this year, which will be the industry's first profit since 2000, as higher oil prices were more than offset by strong traffic and revenue growth.
But rising oil prices are expected to add $14 billion to the industry's total fuel bill of $149 billion next year, based on an average price of $78 a barrel. A barrel of light, sweet crude for January delivery settled at $94.39 a barrel yesterday on the New York Mercantile Exchange.
Meanwhile, the broadening impact of the credit crunch is expected to slow revenue growth to 4.7 percent and traffic growth to 4 percent, according to the association.
"The peak of the business cycle is over, and we are still $190 billion in debt," its chief executive officer, Giovanni Bisignani, said in a news release. "So we could be heading for a downturn with little cash in the bank to cushion the fall."
The association said North American carriers would see the largest fall in profitability, to $2 billion in 2008 from $2.7 billion this year, partly because of the impact of the credit crunch and an aging fleet that makes the effect of high fuel prices more acute than in other regions.
European and Asian carriers' profits will drop by $100 million, with strong traffic growth in Asia expected to partially protect carriers from the credit market turmoil.
The profit for Middle East carriers will remain stable and Latin America airlines are the only ones expected to improve slightly in 2008. Africa will be the only region reporting a loss of $100 million in both years, according to IATA.