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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. At the time of writing, actions were being taken by central banks to avert a credit crunch. IATA central forecast for the airline industry is based on further measures being taken to avert the financing problems now facing Italy and Spain, which may include support from the IMF. Even this relatively benign outcome will fail to prevent a short-lived recession in Europe, and we have revised down our forecast for industry profits in 2012 from $4.9 billion to $3.5 billion.
IATA’s forecast for 2012 also shows a marked divergence of financial performance between regions. European airlines are likely to be hardest hit by recession in their home markets, and we now expect to see small losses in this region. Contrasting performances are shown by North American airlines, where capacity cuts are providing some protection to profitability, and in Asia where, in particular, we expect significant profits generated by high load factors on China’s expanding domestic market.
IATA Industry Outlook Presentation December 2011
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