IATA downgrades 2012 industry estimates

The International Air Transport Association (IATA) has announced revisions to its industry outlook, downgrading its predictions for 2012.

The association now estimates that airline profits for next year will be $3.5bn, compared to previous estimations of $4.9m, with a net margin of 0.6%. The 2011 forecast of $6.9bn remains unchanged.

Profits for 2011 remain "weak but unchanged" at $6.9bn, for a net margin of 1.2%.

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The IATA blames the Eurozone crisis saying it, "puts severe downside risk on the 2012 outlook as illustrated by the recently published OECD economic outlook."

The firm also said that in a worst case scenario it estimates that the global aviation industry could suffer losses exceeding $8bn in 2012.

Tony Tyler, IATA's director general and chief executive officer said: "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," he added.

The firm said that European carriers are by far in the most challenging position, hit by higher passenger taxes and weak home market economies which have limited profitability. The region's carriers are forecast to generate a collective profit of just $1.0bn, down from the previously forecast $1.4bn.

On a more positive note, and at the global level, passenger demand is expected to expand by 6.1%, which is stronger than the 5.9% forecast in September.

However, the association continued its warnings, saying: "Air travel growth has persisted at a stronger pace than we had expected. This travel strength, along with tight capacity management, particularly in North America, has kept load factors high and is supporting a 4.0% increase in yields. This has been helped by a modest increase in forecast revenues, which we expect to total $596bn this year.

"Even if government intervention averts a banking crisis it is unlikely that Europe will avoid a brief recession. Business and consumer confidence has already fallen too far. Global GDP growth forecasts for 2012 have been revised downwards to 2.1%. Historically, the airline industry has seen profit turn into loss whenever global GDP growth falls below 2%."

The travel and leisure sector is down 0.32%, or 13, to 4,186 by 13:11PM.

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