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IATA warns Eurozone crisis will cut profits in aviation industry

IATA warns Eurozone crisis will cut profits in aviation industry

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.