Trade row dims Iata's brighter airline business mood

CAPE TOWN (REUTERS) - Global airlines are gathering for an industry summit boosted by weaker fuel prices, but facing a tough debate over how to share the cost of tackling emissions involved in a trade row.

The International Air Transport Association (Iata), which represents 240 carriers, is holding its annual meeting against a backdrop of higher traffic and cheaper energy that could lift airline profits and underpin hopes of economic recovery.

Mr Tony Tyler, Iata's director-general, said ahead of the June 2-4 talks that airlines felt "modest signs of improvement" as traffic grows sharply in emerging markets, offsetting Europe's debt crisis and a hesitant pick-up in North America.

Iata currently predicts an industry profit of US$10.6 billion (S$13.4 billion) this year, and Mr Tyler said Monday's update would set a "cautiously optimistic" tone for the meeting of 700 aviation executives.

North Sea Brent crude prices have fallen from a peak of US$118 per barrel earlier this year to US$100, raising the prospect that Iata will hike its influential profit forecast. Fuel accounts for a third of airline costs.

An 18-month slump in cargo showed signs of stabilising in April. In North America, airlines have managed to keep capacity in check, keeping planes full and ticket prices up.

Overshadowing the discussions will be lingering fears of a trade war as governments remain deadlocked over fuel emissions. The European Union has pledged to re-introduce a controversial emissions trading scheme opposed by a group of other countries unless everyone can agree on a global system.

However, little progress has been made in a United Nations effort to craft an agreement to lower emissions from international air travel, raising doubts that a September target date can be met. Failure to agree has given the airline industry itself a slim window of opportunity to forge a common position and seize the initiative before the UN's aviation body meets in September.