Airline Profit Guidance Lowered Again

WASHINGTON — The slowing U.S. economy and surging jet fuel prices have forced an international trade group to lower its outlook on airline profits for the second time in four months, with domestic carriers expected to take the biggest earnings hit.

The International Air Transport Association on Tuesday said it expects profits for domestic and foreign carriers to fall to $4.5 billion this year from $5.6 billion in 2007. IATA in December lowered its forecast to $5 billion from a previous estimate of $7.8 billion, due to higher oil prices and credit-market turmoil.

U.S. airlines' profits are expected to fall to $1.8 billion from an estimated $2.8 billion last year. "This could easily turn into a net loss should the current economic environment deteriorate further," according to IATA.

"The offset to rising oil prices during 2004-2007 provided by rising U.S. consumer confidence and travel demand has come to an abrupt end in 2008," the trade group said in a release.

Jet-fuel prices in New York hit a record high near $3.50 a gallon in mid-March, almost double the year-ago price of about $1.85, according to the Energy Department. Fuel costs have become the airline industry's biggest expense, and carriers recently tried to push ticket prices higher to help offset the oil surge and stay profitable.

The Air Transport Association of America in January said higher jet-fuel prices will limit U.S. airlines' combined profitability to between $3.5 billion and $4.5 billion this year compared with last year's estimated profit of $5 billion.

ATA spokesman David Castelveter said the trade group expects to release its own revised forecast, also likely to be lower, later this month after the U.S. carriers report their quarterly earnings.

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