Lower oil prices early in 2007, and the resulting short-term easing of fuel costs, will allow profits in Canada’s air transportation industry to climb to $649 million this year, according to the Conference Board’s Canadian Industrial Outlook: Canada’s Air Transportation Industry – Summer 2007.

“Air transportation industry profits spiked in the first quarter of this year, after oil prices briefly fell from their 2006 peak,” said Michael Burt, senior economist. “However, the recent rebound in oil prices mean that fuel costs are once again increasing, causing profits to dip in the second half of this year.”

“Airlines are absorbing some of the rising fuel costs, which are reducing their profit margins in the short term. But rising domestic travel will allow profits to improve steadily after 2008.”

Strong domestic demand continues to be the primary driver of growth in the air transportation industry. Gains in real disposable income and business profits have led to increased spending on leisure and business travel.

However, the declining number of U.S. visitors is limiting the industry’s performance. The surging Canadian dollar and the implementation of the Western Hemisphere Travel Initiative (WHTI) for air travelers earlier in the year have contributed to a decline in the number of American visitors. With the implementation of the WHTI essentially completed, the number of U.S. visitors is expected to start to recover in the coming year.