Not again! Air fares to rise as airline profits set to slump 78%

Air fares are set to rise after airlines were today forecast to make just a fifth of the profits they made last year.

The airlines' industry body, The International Air Transport Association, made the warning as a result of higher oil prices and less disposable customer income.

Airlines are expected to make profits of £2.4 billion in 2011 - a whopping 78% slump from the £11 billion made in 2010.

The forecast is a significant size smaller than March's prediction of a £5.2 billion 2011 profit.

The crisis in the Middle East has pushed oil prices to 110 US dollars a barre - a 15% increase since March.

Giovanni Bisignani, IATA's Director General and CEO, told the Daily Mail: 'Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year.

'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.'

Simon Buck, chief executive of the British Air Transport Association, said an increase in fare prices would be the result of high fuel prices and taxation by the Government.

He said: 'The biggest problem we have in the UK is that the Government imposes the highest level of taxation on aviation in the world.

'The Coalition has talked about increasing the number of tourists but make it as expensive as possible by having these high rates of taxation.'

Mr Buck urged George Osborne to think again about a double inflationary increase in the rate of Air Passenger Duty next year.

He added: 'Over the next five years the Government is planning to take £15 billion in tax from the airline industry - more than they are taking from the banking sector.'

Higher air fares are putting off savvy leisure customers, with passenger numbers falling by between 3% and 4% over the past five months, making it harder for airlines to increase revenues.

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