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Industry experts predict huge losses for European airlines

The International Air Transport Association (IATA) has predicted significant financial losses for European airlines over the coming year.

The international body has almost doubled its predictions on the losses which EU airlines could potentially have to deal with, from $600 million to $1.1 billion (£706 million). The Eurozone is already economically damaged and is having a dramatic effect on businesses operating in the region.

This marks the second year for declining returns on behalf of European airlines. According to the IATA, industry profits fell to 1.3% in 2011 and this year net profits have been stagnant at 0.5%. Tony Tyler, IATA’s Director General and CEO, commented: “The Eurozone crisis is standing in the way of improved profitability and we continue to face the prospect of a net profit margin of just 0.5%.

“Although airlines face the common challenges of high fuel prices and economic uncertainty, the regional picture is diverse. Carriers in the Americas are seeing improved prospects for 2012. The rest of the world is seeing reduced profitability. For European carriers, the business environment is deteriorating rapidly, resulting in sizable losses.”

The aviation industry is having a particularly tough time in Europe as the Eurozone crisis deepens. The new forecast is based on the assumption that the European economy will plummet further into the financial abyss and will “deteriorate into a widespread banking crisis.”

To make matters worse, the association predicts that demand will slow down as both the UK and Spain are in recession. Just as the Olympics is set to bring in thousands of tourists to the UK from European and international destinations, the IATA suggests that there are “inefficiencies in air traffic management” that need to be addressed. If you are concerned about your airline or any other issues that might arise on your holiday, it could be worth taking out travel insurance.

Date Created: 22 June 2012

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