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6<br />
The air transport industry is<br />
fragile. Airlines made a profit<br />
of $7.9 billion in 2011. That is<br />
half of the $15.8 billion profit<br />
realized in 2010. And on 2011<br />
revenues of $598 billion, that<br />
translated to a net profit margin<br />
of just 1.3%.<br />
The current year promises to<br />
be more challenging. April<br />
was the 15th month with oil<br />
prices above $100 per barrel<br />
(Brent). Fuel now accounts for<br />
over 30% of average operating<br />
costs. A decade ago, it<br />
was 13%. A further price spike<br />
could easily push the industry<br />
into losses.<br />
Airlines are similarly vulnerable<br />
to economic cycles. Historically,<br />
the airline industry has produced<br />
a collective loss when<br />
GDP growth falls below 2%.<br />
In April <strong>2012</strong>, the Economist<br />
Intelligence Unit was predicting<br />
growth of 2.2%. Political instability<br />
continues in the Eurozone<br />
as it grapples with the sovereign<br />
debt crisis. The United<br />
Kingdom and Spain have<br />
already gone back into recession.<br />
If others follow, the ripple<br />
effects would most certainly be<br />
felt in all global markets.
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