- Air Jamaica's fuel bill in 2007/08 was estimated at $7.9 billion.

The slowing United States economy and surging jet fuel prices have forced an international trade group to lower its outlook on airline profits for the second time in four months, with domestic carriers expected to take the biggest earnings hit.

The International Air Transport Association on Tuesday said it expects profits for domestic and foreign carriers to fall to US$4.5 billion this year from US$5.6 billion in 2007.

IATA in December lowered its forecast to US$5 billion from a previous estimate of US$7.8 billion, due to higher oil prices and credit-market turmoil.

US airlines' profits are expected to fall to US$1.8 billion from an estimated US$2.8 billion last year.

"This could easily turn into a net loss should the current economic environment deteriorate further," according to IATA.

"The offset to rising oil prices during 2004-2007 provided by rising US consumer confidence and travel demand has come to an abrupt end in 2008," the trade group said in a release.

Since this year, oil prices have hit a new high of US$112 per barrel and are expected to climb to US$120.

Jet prices have almost doubled, hitting a record high in New York near US$3.50 a gallon in mid-March, compared to the year-ago price of about US$1.85, according to the Energy Department.

Biggest expense

Fuel costs have become the airline industry's biggest expense, and carriers recently tried to push ticket prices higher to help offset the oil surge and stay profitable.

In Jamaica for example, where national carrier Air Jamaica's losses have accumulated to about US$1.15 billion, its fuel bill in 2007 was estimated at US$111 million (J$7.88 billion) or approximately 23 per cent of total operating expenses.

Staff costs of US$90 million and lease expenses at US$82 million rounded out the airline's top three cost items.

Jamaica has placed the carrier on the market for sale. But in the meantime, its annual subsidy of the carrier has reached $1.95 billion.

The Air Transport Association of America spokesman David Castelveter said the trade group expects to release its own revised forecast, also likely to be lower, later this month after the U.S. carriers report their quarterly earnings.

In its last outlook in January, ATA said higher jet-fuel prices would have limited US airlines' combined profitability to between US$3.5 billion and US$4.5 billion this year compared with last year's estimated profit of $5 billion.