Airline profits lose altitude
March 21, 2011, Montreal - Canadian airline profits will lose altitude in 2011 from last year's strong performance due to higher fuel and labour costs, a Conference Board of Canada report said Monday.
March 21, 2011 By The Canadian Press
Pre-tax profits are expected to fall by about one-third to $785 million in 2011, down from $1.2 billion last year.
Profits will remain in the $700 million to $800 million range annually for the next three years, the report said.
Following two years of decline, costs are expected to increase by more than nine per cent in 2011 due to higher oil prices and increased hiring.
Canada's main airlines including Air Canada, WestJet, Transat AT and Jazz.
Conference board economist Maxim Armstrong said cost-control measures established during the recession helped airline profits to take off when sales started to improve last year.
But with costs expected to accelerate, these profit levels won't be sustainable — although they will remain high by historical standards, he said.
Airline sales are growing as businesses loosen budget constraints and consumer confidence grows.
The Conference Board, a private-sector forecaster based in Ottawa, said the increased number of international travellers to Canada in recent months from emerging countries and the United States was especially encouraging.
While the trend should continue in coming years, domestic travel will remain the main source of growth for the industry.
In a separate report, the association that represents international scheduled carriers recently said it expects member net profits will decrease almost by half to US$8.6 billion from US$16 billion earned in 2010.
The International Air Transport Association (IATA) revised its industry outlook downwards on March 2 due to high oil prices caused by political unrest in the Middle East and northern Africa.