Airline unable to catch a break even cheap oil

Airline unable to catch a break even cheap oil

Oil is getting cheaper. That means cheaper petrol for drivers and cheaper jet fuel for airlines. But the recent dip in fuel prices, which are down 8% this year, isn't uniformly good news for the international airline industry. That's because of what's causing the price dip: huge economic uncertainty in Europe and slow-downs almost everywhere else, especially China.
Airlines would be more optimistic about the drop in fuel prices if it wasn't accompanied by so much demand-side risk. But that's not the world we live in now—and a fall into a broader worldwide slump would be far worse for the airline industry than high fuel prices have been. Reuters's Tim Hepher reports from Beijing, where the executives of the world's largest airlines are meeting this week:
"The reduction in fuel prices is a great thing for the airline industry but they are coming down because of concerns over world economic activity," said Tony Tyler, director general of the International Air Transport Association (IATA).
"If the world enters an economic slump, that will be even worse for the industry than the higher fuel price was on its own," said Tyler as heads of most of the world's airlines flew into Beijing for a three-day annual meeting starting on Sunday.
IATA, whose 240 members account for 84 percent of world air traffic, is expected to leave its overall industry profit forecast broadly unchanged at the June 10-12 meeting.
The airlines don't seem to be able to catch a break lately. At $7.9 billion, their profits in 2011 were half of what they were in 2010. They're expected to be cut in half again this year, according to Mr Hepher. With China—the world's fastest-growing market for air travel—starting to perhaps see slower economic growth, it's even more essential that Europe sort out its problems. Even if the American economy continues to limp along, and China doesn't slow down significantly, Europe's troubles continue to have the potential to cause economic catastrophe and severely damage international industries, including airlines. As The Economist's cover leader suggested this week, "a lot depends on one woman."
Apple just unleashed a barrage of new products at its annual Worldwide Developers Conference this week in San Francisco. But the one thing that most fans were speculating about in the months leading up to this event—Apple’***pected push into the TV market—is nowhere in sight. During a two-hour keynote on Monday, Apple executives said not a word about TV.