Airlines fear $8bn losses over Eurozone crisis

The International Air Transport Association (IATA) has downgraded its profit forecast for the airline industry in light of the Eurozone crisis.

It has reduced its 2012 profit forecast from $4.9 billion to $3.5 billion, warning that the crisis "puts severe downside risk on the 2012 outlook".

If the Eurozone crisis evolves into a full-blown banking crises and European recession, IATA estimates that the global aviation industry could suffer losses exceeding $8 billion in 2012.

"The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis," it said.

"Such an outcome could lead to losses of over $8 billion - the largest since the 2008 financial crisis," said Tony Tyler, IATA"s director general and CEO.

"The global forecast for 2011 is unchanged at $6.9 billion. But regional differences have widened, reflecting the very different economic environments facing airlines in different parts of the world.

"And the overall margin of 1.2% tells you just how difficult the battle for profitability in this business is."

IATA said European carriers are by far in the most challenging position due to higher passenger taxes and weak home market economies.

This is despite European airlines being one of the fastest growing regions in terms of traffic this year.

by Bev Fearis