Airline industry in a tailspin as oil prices rocket

IATA now fears airlines will post profits of just $4 billion (£2.44 billion) in 2011, less than half the amount it forecast in March and a fraction of the $18 billion in profits seen last year.

The forecast comes as OPEC faces pressure to ease the pressure on oil prices by upping production at the cartel's latest meeting in Vienna this week.

Director general Giovanni Bisignani warned "there is little buffer left against further shocks".

He said: "That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance.

"The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel."

Airlines bounced back strongly from recession last year, but the industry faces fresh headwinds from Japan's earthquake and political turmoil in the Middle East and North Africa as well as the high oil price, IATA said. The body has upped its forecast of average oil prices this year by 15% to $110 a barrel.

Growing worries over signs of stalling economic recovery in the West has prompted some OPEC members including Saudi Arabia to push for an increase in supplies to support growth by bringing crude prices back below $100 a barrel. Members are looking for an increase of at least one million barrels a day this week.

Echoing global economic fortunes, Asia-Pacific airlines are expected to be the most profitable, but European carriers - also hit by rising passenger taxes and the sovereign debt crisis - are likely to be worst hit.

Budget airline Ryanair recently warned that the rising cost of oil would force its fares up by an average 12% this year, while easyJet's losses virtually doubled to £153 million in the six months to March.