Oil price hikes handicap growth in air travel sector. The International Air Transport Association (IATA) has announced international scheduled traffic results for January that show an 8.2% increase in passenger traffic and 9.1% growth in airfreight compared to January 2010. By January 2011, air travel volumes were 18% higher compared to the low point reached in early 2009 and some 6% above the pre-recession peak of early 2008. Airfreight in January was 39% above the low point reached at the end of 2009 and some 6% above the pre-recession peak of early 2008. Freight has, however, fallen 2% since its May 2010 peak at the height of the re-stocking bubble. Giovanni Bisignani, IATA's Director General and CEO, was delighted that most major indices point to strengthening world trade and economic growth. Nonetheless, the aviation sector is very concerned by the still very high oil prices, given the region's instability. December's forecast is based on an average annual oil price of $84 per barrel but today the price is over $100. Despite high revenues thanks to 3.1% growth in the world economy forecast this year, these revenues will only partially compensate for the increased costs, affirmed Bisignani. He also said that profits would be half as much as last year. Therefore, out of the forecasted $594 billion in revenues, $8.6 billion in profits only represents a net profit of 1.4%. IATA's forecasts for the different regions in 2011 are as follows: European carriers are expected to make a $500 million profit. This is up from the $100 million previously forecast, but well below the $1.4 billion that the region's carriers made in 2010. The ongoing banking and government debt crisis are keeping domestic home markets fragile but the weak euro is continuing to provide stimulus to export industries, outbound freight and long-haul business travel which is driving the upgrading of the region's profit forecast. Even so, Europe's carriers remain the least profitable among the major regions.- Europe: European carriers are expected to make a $500 million profit. This is up from the $100 million previously forecast, but well below the $1.4 billion that the region's carriers made in 2010. Domestic home markets are fragile but the weak euro is continuing to provide stimulus to export industries and outbound freight and long-haul business travel is driving the upgrading of the region's profit forecast. Even so, Europe's carriers remain the least profitable among the major regions. - Asia/Pacific: Carriers are expected to deliver the largest collective profit of $3.7 billion and the highest operating margins of 4.6%. This is down substantially from the $7.6 billion that the region's carriers made in 2010 and from the previously forecast $4.6 billion for 2011. The region is particularly sensitive to oil price hikes. - North America: Carriers are expected to deliver $3.2 billion profit, unchanged from the previous forecast and down from the $4.7 billion profit made in 2010. Oil price hikes will have less of an impact than in other regions, given earlier capacity reductions and the US economy, which is proving more resistant than expected. - Middle East: Middle East carriers are expected to return a profit of $700 million. $100 million more than previously forecast, but down from the $1.1 billion profit that the region posted in 2010. Political instability in the region is expected to take its toll in Egypt, Tunisia and Libya, which combined account for about 20% of the region's international passenger traffic. This is balanced by the Gulf area which benefits from economic activity related to high oil prices and whose hubs continue to win long-haul market share. - Latin America: Latin American carriers are forecast to post a $300 million profit. This is down sharply from the $1 billion that the region made in 2010 and from the previously forecast $700 million. Strong economic growth and international trade in the region are driving travel and cargo demand and the region's profits for airlines. Exposure to higher oil prices is the key reason for the expected deterioration in the region's profitability this year. - Africa: This is unchanged from the previous IATA forecast but down from the $100 million profit that the region posted in 2010. Strong economic growth and transport demand on the back of foreign direct investment and rapidly growing trade links with Asia is keeping the region's carriers out of the red. However, they face intensifying competition from Middle Eastern carriers and others for lucrative business traffic. (I.L./transl.fl)