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Global airlines expect to make $1 billion less profit this year than previously hoped, denting a U.S.-led recovery, as the Ukraine crisis pushes up the industry’s fuel bills, the International Air Transport Association said on Wednesday.
Higher oil prices driven by tensions in Crimea are expected to add $3 billion in unexpected costs in 2014, partially offset by a $2 billion upward revision in cargo revenue.
The Geneva-based organization now expects airlines to make a profit of $18.7 billion this year, down from $19.7 billion in its previous forecast in December. But the industry remains on a cyclical upswing after a $12.9 billion profit in 2013.
“The situation in Ukraine is causing instability that is pushing up the price of oil and that was the main negative driver of today’s downwards revision,” IATA Director General Tony Tyler told a news conference.
Economic weakness in Argentina and Brazil is also clouding profits. Latin American airlines are expected to post a profit of $1 billion this year, a third less than previously projected.
IATA, which represents about 200 airlines and runs the industry’s settlements system for ticket sales, warned some airlines could stop flying to Venezuela amid a row over the freezing of $3.7 billion of cash owed to foreign airlines.
Tyler said he had written to Venezuelan President Nicolas Maduro after a lack of progress in negotiations that began months before Venezuela’s worst unrest in a decade.
“It is unacceptable that Venezuela is not playing by the rules to which it is treaty-bound,” Tyler said.
“I know some airlines are considering whether to stop flying (there) altogether. We very much hope that won’t be the case but each airline is making its own commercial decision,” he added.
Inflation in Venezuela hit 56 percent last year and helped spark opposition protests that have dragged on for close to a month.
Reporting by Robert Evans in Geneva and Tim Hepher in Paris. Editing by James Regan.
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