European aviation industry losses deepen: IATA

The spiraling euro crisis is likely to lead to bigger losses in the European aviation industry, with a 2012 International Air Transport Association (IATA) outlook standing at US$1.1 billion in losses.

The number is nearly twofold that of an earlier forecast of $600 million in losses.

“The continued and deepening European sovereign debt crisis has led markets to expect further deterioration and damage to economic growth. The next months are critical and the implications are big,” IATA director general and CEO Tony Tyler said.

However, global industry profits are expected to be $3 billion, unchanged from the last update issued in March.

Meanwhile, 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 new profitability outlook, according to Tyler.

This condition will be the second year of declining returns since airline profits peaked at $15.8 billion in 2010. In 2011, industry profits fell to $7.9 billion.

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

North American carriers are expected to book a profit of $1.4 billion, up from the March projection of $900 million and a slight improvement from the $1.3 billion that the region’s carriers made in 2011.

Latin American carriers are predicted to post profits of $400 million, a $300 million increase from the previous projection, Tyler said.

Meanwhile, the outlook for African carriers is unchanged with expected losses of $100 million, he said.

“This is a downgrade on the breakeven performance in 2011. Weakness in originating traffic from the key European market is expected to adversely affect international passenger markets in the region,” he explained.

In addition, Asia-Pacific airlines are projected to make the largest contribution to industry profits with $2 billion, even after the forecast was downgraded by $300 million from the previous outlook.

The slowdown in the Chinese and Indian economies will become one of the factors in the industry’s forecast slower growth, Tyler said.

He also said that Middle Eastern carriers were expected to book profits of $400 million, down from the March projection of $500 million.

This is a significant drop compared with 2011, when the region’s carriers returned a profit of $100 million, he said. (mtq)