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High oil prices, global crises drive down airline profits

An airplane

BOB MOON: That whining coming from international airlines today isn't just from their jet engines. It's the sound of an industry complaining about sharply falling profits.

From the Europe Desk in London, Marketplace's Stephen Beard reports.


STEPHEN BEARD: Airline profits soared last year as the global economy recovered from recession. They reached $18 billion. But this year, profits have stalled. And will likely plummet by 80 percent.

The industry's trade body blames three main factors. The Arab unrest. That cut air travel to the Middle East. Japan's earthquake had an even more devastating effect on the vitally important Japanese market.

But the trade body's boss Giovanni Bisignani says the biggest blow has been the steep rise in the price of oil.

GIOVANNI BISIGNANI: One dollar increase per barrel means $1.6 billion. We've seen that oil has already increased by nearly 30 percent and that is a big, big problem for us.

And an even bigger problem could be looming. He says the airlines could wind up in the red this year if the worst fears of a slump in economic growth are realized.

In London I'm Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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