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Stockwatch European airlines fall after IATA slashes industry profit forecasts

Paris

(Thomson Financial) - Shares in European airlines fell heavily Monday morning after the International Air Transport Association (IATA) slashed its 2008 profit forecasts for the sector, due to escalating oil prices.

At 11:15 a.m., Air France-KLM was down 0.47 euros or 2.73 percent at 16.72, while Lufthansa was 0.35 or 2.10 percent lower at 16.32 and British Airways was down 3-3/4 or 1.61 percent at 228-3/4 pence.

"IATA is predicting a particularly difficult year for the airline sector, which is really hitting shares," said a dealer at a Paris-based brokerage.
In a statement released early Monday, the association said it was revising its industry financial forecasts for 2008 significantly downwards to a loss of $2.3 billion, a massive swing from its previous forecasts for a profit of $4.5 billion.

The dramatic cut is based on a new consensus oil price of $106.5 per barrel for Brent crude, compared to $86 previously. But the IATA also warned that industry losses could rise to $6.1 billion if the oil price remains at $135 per barrel for the rest of the year.