Shares in Cathay Pacific Airways fell nearly 7% yesterday on the news from the International Air Transport Association (IATA) that airline industry profits will fall next year in the face of slower economic growth, higher fuel prices and austerity measures.
IATA warns that airlines could see a 40% decline in profits in 2011 – a fall of $9.1 billion from $15.1 billion in 2010. IATA chief Giovanni Bisignani warned profit margins could fall by half to 1.5%, while revenue looks set to grow 5.8% to $598 billion.
Shares in Cathay fell as investors express their doubt the airline could sustain the stellar growth posted this year into 2011 and fears it could fall victim to overcapacity. This is despite the fact Cathay’s November passenger traffic rose 8.7%, although it was the slowest monthly gain for the past four months.
Air China share dipped 3.6% on the news; China Eastern Airlines dropped 2.6%, while China Southern Airlines dropped 2.1%.