Airlines look for relief in oil price drop

Cathay Pacific chief executive John Slosar hopes the recent drop in oil prices will provide some relief to airlines around the world grappling with the turmoil in Europe and a sluggish global economy.

Mr Slosar's comments come as the International Air Transport Association (IATA) forecast a drop in profit expectations for airlines in the Asia-Pacific region, due to weaker growth in the Indian and Chinese economies and a soft cargo market.

Asia-Pacific carriers, including Cathay, Qantas Airways and Virgin Australia, were expected to generate profit of $US2 billion ($A2.03 billion) in calendar 2012.

This was down from $US2.3 billion ($A2.33 billion) IATA predicted three months ago.

In May, Cathay Pacific warned of a disappointing first half profit result due to high fuel prices and weakness in US and European markets.

In response, the Hong Kong-based airline said it would reduce capacity on long-haul routes and retire older Boeing 747-400 aircraft sooner than expected.

Mr Slosar said not much had changed since the profit warning was issued, except a welcome drop in the oil price.

"Very positively, we have seen a real move down in the oil price," Mr Slosar told reporters on the sidelines of the IATA annual general meeting in Beijing on Monday.

"I think that will be better both for aviation with lower oil but a lot better for the world economy too."

IATA, which represents about 240 airlines, kept its global profit outlook unchanged from three months ago, with the global aviation industry forecast to post $US3 billion of profits in calendar 2012.

However there were risks in the period ahead, IATA chief executive Tony Tyler said, due to oil prices and the sovereign debt crisis in Europe.

"The industry's profitability is on a knife edge," Mr Tyler said in his AGM opening address.

"If the bottom line worsens by even just the equivalent of just one per cent in revenue, our $US3 billion profit very quickly becomes a $US3 billion loss."

Meanwhile, Mr Tyler criticised the failure to act on Sydney airport's growing capacity needs, grouping Australia with the United Kingdom, Germany and India as places where "less enlightened governments" had not made airport investment a priority.

"There is no consensus on future capacity even after decades of discussion," Mr Tyler said referring to Sydney.

"Where governments are focused on jobs and growth, the urgency of accommodating the increasing demand for connectivity is crystal clear.

"You cannot unleash the power of an industry to drive economic benefits unless it has the capacity to grow profitably."

Sydney Airport has said it had enough capacity to meet expected demand through to at least 2045 without changes to runways, the curfew or cap on hourly aircraft movements.

*The reporter travelled to Beijing courtesy of China Southern and IATA.

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