Eurozone crisis could plunge airline industry into $8bn loss, IATA warns
Tony Tyler, IATA’s director general and chief executive, says global airlines will plunge into combined losses of $8bn (£5.1bn) next year if the eurozone crisis turns into a full blown banking crisis and recession. On their most optimistic assumption, the profit might be $3.5 billion. That estimate is down from the $4.9bn IATA was forecasting just three months ago. European airlines, however, are expected to make a loss regardless of the outcome of the eurozone crisis
International Air Transport Association 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 $3.5bn
by Gwyn Topham, transport correspondent in Geneva
Global airlines will plunge into combined losses of $8bn (£5.1bn) next year if the eurozone crisis turns into a full blown banking crisis and recession, the International Air Transport Association has warned.
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 $3.5bn next year. That estimate is down from the $4.9bn IATA was forecasting just three months ago.
European airlines, however, are expected to make a loss regardless of the outcome of the eurozone crisis. Tony Tyler, director general and chief executive of IATA, warned: “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.
A better indicator of what was ahead was a struggling freight market: “While there isn’t much sign that travellers are feeling the pinch, the situation is very different for the shippers.” The biggest drop in the freight market is in Asia, down 15% 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% higher than this time last year – contribute to a squeeze on airline profits.
Meanwhile Tyler, a British citizen, hit out at politicians who he claimed were “destroying the tradition of UK leadership in civil aviation”.
Citing the block on Heathrow expansion, higher taxes, and the ambition to build a high-speed rail system, Tyler said: “People will one day look back and wonder how they let the UK lose what was once a great competitive advantage.”
The air passenger duty increase confirmed on Tuesday by the Treasury would, he said, cost the UK economy £4bn and 80,000 jobs by 2015.
Tyler said cash-strapped governments should not see aviation as a soft target, with Germany, Austria and the US also planning levies “to contribute to deficit reduction”, he claimed.
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