The debt crisis in Europe is expected to double the combined net losses for the continent’s airlines to $1.1bn in 2012, according to forecasts.
The International Air Transport Association (IATA) stated that European carriers were also being affected by elevated and rising tax regimes, inefficiencies in air traffic management, and the increase in cost of complying with inadequate planned rules.
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IATA director general Tony Tyler said that with little clarity on how European governments were going to manage the situation beyond providing further liquidity, the risk of a major downward shift in economic prospects was very real.
"The next months are critical and the implications are big," he said.
IATA reported that the gain for the global airline industry is expected to remain unaffected to $3bn in 2012, following the rise in profits of North American and Latin American airlines, which compensated the losses reported by European and Asia-Pacific carriers.
The agency also reported that a hike in oil prices would also contribute to the losses in the world airline industry, while the profits could be wiped off if Europe went into recession.
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By GlobalDataAccording to Taylor, the most immediate risk is Europe’s debt crisis, which could drag down profits in the event of a recession and 1% decline in global airline revenue would wipe off the small projected profit into a $3bn loss.
IATA’s profit forecast marks a 50% decline from $7.9bn registered in 2011, which is down by a significant margin from the $15.8bn profits recorded in 2010.
The agency also appealed to governments to end the conflict over European carbon charges on airlines by implementing a global system to control the airline industry’s various gas emissions.
Image: Slow global growth and increase in costs during recent years has affected development in the airline sector worldwide. Photo: courtesy of Houston Airport System.
