Eurozone crisis could plunge airline industry into $8bn loss, IATA warns

BY AGENCIES

THE 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.

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.