Airlines’ Profits to Plummet in 2012
June 15th, 2012
According to the latest forecast from the International Air Transport Association (IATA), the aviation sector is forecast to make a profit of 3,000 million dollars (2,375 million euros) in 2012, which is less than half of that of the previous year, when the industry earned 7,900 million dollars (6,254 million euros), and despite a drop in fuel prices, which threatened to weigh down the annual result.
Despite the reduction in over half of the forecasts for 2011’s final year-end results, IATA stressed that they are looking upon this as “positive” news, because in their previous forecasts, the association, which represents 93% of the sector, envisioned a scenario in which the profit could run into negative figures because of the continued rise in oil prices.
“Our concern now is not so much the cost of kerosene, which is still high, but the crisis in the eurozone in general, and the banking crisis of some European countries, in particular,” said the CEO of IATA, Tony Tyler, while in attendance at the 68th general assembly of the Association and the International Transport Summit held this week in the city of Beijing.
According to this forecast, this year will be the second consecutive year with declines in industry profits, after the peak reached in 2010, when airlines earned 15,800 million dollars (about 12,500 million euros). The profit margin forecast for this year is only 0.5%, which is eight-tenths below that obtained last year (1.3%).
As for the turnover, IATA expects the industry to achieve operating income amounting to 631,000 million dollars (500,000 million euros), a figure very tight with respect to operating costs, of 623,000 million dollars (493,000 million euros), resulting in an operating profit (EBIT) of 8,600 million dollars (6,808 million euros), “a narrow profit from which must be subtracted, taxes, interest and other financial transactions.”
Europe leads the losses
European airlines will be those that generate most losses in the sector worldwide. Thus the figure of 600 million dollars in the ‘red’ (-475 million euros) that IATA predicted just three months ago, has doubled due to the “macroeconomic environment in which companies operate,” to forecast losses valued at 1,100 million dollars (870 million euros).
Passenger demand will remain “weak”, with an increase of 2.3%, “a significant drop after expanding 6.7% in 2011.” “Some of the largest economies in the region such as Spain and Britain, are already in recession. In addition, many of these countries’ airlines are being affected by increases in air fares and ill-considered regulations,” lamented Tyler.
In contrast, El Mundo reported that IATA expects the Asian continent to ‘save’ the overall result by contributing to the sector with 2,000 million dollars (1,583 million euros) of profits, although this figure is 13% below the March forecast for 2012, and less than half of Asian airlines’ profits for last year (3,880 million euros).
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