Global Airlines' Profit Forecast Cut To $4 Billion

0.7 percent margin on expected revenues of $598 billion

The costs are rising while airlines' capacity is also expected to expand 5.8 per cent this year, above the previous forecast of 4.7 per cent. Yield forecasts are expected to be 3 per cent and 4 per cent, for passenger traffic and cargo, respectively.

IATA noted that a key risk is a weakening of global economic growth. High energy prices will certainly have a slowing impact on economic growth. However, the impact will be mitigated by two factors. First, while high oil prices previously triggered recessions, today's economies (which generate a unit of GDP using just half the energy required in the mid-1970s) are less sensitive. Second, the corporate sector is cash-rich, business confidence is high, and world trade continues to expand at around 9 per cent annually. The International Monetary Fund and others have raised global growth projections, which would indicate a recovery in demand growth to the historical 5.6 per cent level for the second half of 2011. IATA's forecast for continued, albeit lower, airline profits despite $110 a barrel oil prices, is dependant on a strong economy to generate sufficient revenues to partially offset higher fuel costs.

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