Fri, Dec 09, 2011 - Page 10 News List

Eurozone crisis may lead to US$8 billion airline industry loss

The Guardian, GENEVA, SWITZERLAND

Global airlines will plunge into combined losses of US$8 billion next year if the eurozone crisis turns into a full blown banking crisis and recession, the International Air Transport Association (IATA) has said.

IATA said the best possible outcome — based on EU governments “muddling through” and resolving the eurozone crisis — would be for global airlines to generate total profits of US$3.5 billion next year. That estimate is down from the US$4.9 billion IATA was forecasting just three months ago.

FOREGONE CONCLUSION

However, European airlines are expected to make a loss regardless of the outcome of the eurozone crisis.

IATA director-general and chief executive Tony Tyler said: “The only open question is how deep the losses will be.”

Brian Pearce, IATA’s chief economist, said that while passenger numbers looked to be holding up surprisingly well in Europe, this was a “very fragile foundation” for future airline growth.

FREIGHT

A better indicator of what was ahead was a struggling freight market.

“While there isn’t much sign that travelers are feeling the pinch, the situation is very different for the shippers,” Pearce said.

The biggest drop in the freight market is in Asia, down 15 percent over the last year, reflecting the fall of demand for Asia’s manufactured goods in developed economies.

The airlines’ strong recovery since 2009 has faltered, with stagnant growth in international trade and slumping business confidence. Pearce said relatively high fuel costs — even with oil prices falling from their peak, they are 30 percent higher than this time last year — contribute to a squeeze on airline profits.

Tyler said cash-strapped governments should not see aviation as a soft target, with Germany, Austria, the UK and the US planning levies “to contribute to deficit reduction,” he said.

Globally, Tyler identified further threats to airline profitability as states “dragging their feet” in implementing the Single European Sky project. He said 22 out of 27 states involved are likely to miss targets in a scheme designed to increase airspace capacity and cut air traffic costs.

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