The International Air Transport Association (IATA) has announced revisions to its industry outlook, downgrading its central forecast for airline profits from $4.9 billion to $3.5 billion for 2012.
This equates to a net margin of just 0.6 per cent for the industry as a whole.
For 2011, profitability remains weak but unchanged at $6.9 billion for a net margin of 1.2 per cent.
The Eurozone crisis puts severe downside risk on the 2012 outlook as illustrated by the recently published OECD economic outlook.
In a worst case scenario, should the Eurozone crisis evolve into a full-blown banking crises and European recession, IATA estimates that the global aviation industry could suffer losses exceeding $8 billion in 2012.
“The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis,” IATA director general Tony Tyler.
“Such an outcome could lead to losses of over $8 billion—the largest since the 2008 financial crisis.”
Around the world, European carriers are by far in the most challenging position.
The region’s carriers are forecast to generate a collective profit of just $1.0 billion, down from the previously forecast $1.4 billion, and an EBIT margin of 1.2%.
Low profitability has been despite European airlines being one of the fastest growing regions in terms of traffic this year.
The full financial forecast can be seen here.