IATA: Clouds gathering over Eurozone aviation

IATA: Clouds gathering over Eurozone aviation

The International Air Transport Association (IATA) has released its revised industry outlook for 2012, downgrading prospects for European, Asia-Pacific and Middle Eastern carriers.

European losses are now expected to be $1.1 billion - nearly double the previously forecast $600 million loss.

The change has been prompted by the deepening European sovereign debt crisis, which has led markets to expect a further deterioration and damage to economic growth, the adverse impact of which has been built into the forecast.

Compared with the previous forecast in March, North American and Latin American carriers are expected to see improved prospects.

The outlook for African carriers is unchanged.

Overall, global industry profits are expected to be $3.0 billion, unchanged from the last update in March.

A fall in oil prices, stronger than expected growth in passenger traffic and a bottoming out of the freight market are driving some improvements in the profitability outlook.

This year’s projected industry profit will yield a net profit margin of just 0.5 per cent.

This will be the second year of declining returns since airline profits peaked in 2010 at $15.8 billion with a net profit margin of 2.9 per cent.

In 2011, industry profits fell to $7.9 billion for a 1.3 per cent net profit margin.

“The $3 billion industry profit forecast has not changed,” said IATA director general Tony Tyler.

“But almost everything in the equation has.

“Demand has been better than expected, so far this year.

“And fuel prices are now lower than previously anticipated, but that’s on the expectation of economic weakness ahead.

“The Eurozone crisis is standing in the way of improved profitability and we continue to face the prospect of a net profit margin of just 0.5 per cent.

“Although airlines face the common challenges of high fuel prices and economic uncertainty, the regional picture is diverse.

“Carriers in the Americas are seeing improved prospects for 2012. The rest of the world is seeing reduced profitability.

“For European carriers, the business environment is deteriorating rapidly resulting in sizable losses,” concluded Tyler.