Europe could land airlines with $8bn losses

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The Independent Online

The global airline industry could face losses of more than $8bn next year if European leaders fail to get a grip on the debt crisis, the International Air Transport Association warned yesterday.

The biggest threat is from the prospect of the debt storm evolving into another banking crisis that triggers a deep recession into Europe and drives a slowdown in global growth, the industry body said. Iata director general Tony Tyler said that while this was "admittedly [the] worst case" scenario, it was "buy no means unimaginable".

"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," he warned. "Such an outcome could lead to losses of over $8bn – the largest since the 2008 financial crisis."

Iata central forecast, while less severe, also envisages tough times.

The body yesterday lowered its main estimate of airline profits for next year to $3.5bn from $4.9bn, while keeping its estimate for this year unchanged at $6.9bn. And even if leaders avert a banking crisis, Iata warned that European carriers were likely to face losses of $600m next year, as they count the cost of economic weakness in their backyards and increases in passenger taxes.

"Even our best case scenario for 2012 is for a net margin of just 0.6 per cent on revenues of $618bn. But the industry is really moving at two speeds with highly taxed European carriers headed into the red," Mr Tyler said.

Underscoring the regional differences, Iata said that while its central forecast anticipated losses in Europe, Asia-Pacific and North American carriers were expected to book profits of $2.1bn and $1.7bn respectively.