Tuesday June 12, 2012

IATA: Airlines’ 2012 profits to plummet

Its chief hits out at EU’s carbon tax scheme

BEIJING: The International Air Transport Association (IATA) warned that global profits would more than halve this year owing to surging oil prices and the eurozone crisis, with European carriers suffering losses of US$1.1bil.

Tony Tyler, head of the airline industry group, also hit out at a controversial carbon tax scheme put in place by the European Union (EU), lashing it as a “polarising obstacle to real progress”.

Tyler told the group's AGM in Beijing that “2012 is another challenging year. We expect revenues of US$631bil but a profit of just US$3bil”. That compares with a profit of US$7.9bil in 2011, IATA figures show.

Tyler cited the cost of oil as a reason for “anaemic global profitability”, and IATA said it predicted an overall average price of US$110 a barrel this year, warning political risks could push this up.

Brent crude oil is currently sitting at US$100 a barrel while West Texas Intermediate is about US$85, although both are down more than US$20 from multi-year peaks earlier this year.

International Air Transport Association (IATA) director general Tony Tyler delivers a speech during the opening of the 68th IATA annual general meeting in Beijing June 11, 2012. - REUTERS

But Tyler added: “The biggest and most immediate risk is the crisis in the eurozone. If it evolves into a banking crisis we could face a continent-wide recession, dragging the rest of the world and our profits down.”

In a statement released as the AGM began yesterday, IATA said it had downgraded its outlook for European airlines in 2012, projecting losses of US$1.1bil compared with its previous forecast of US$600mil in losses.

The estimate comes despite figures showing 5.6% year-on-year growth in European passenger traffic in April and predictions global passenger numbers would rise to nearly three billion this year versus 2.8 billion in 2011.

“For European carriers, the business environment is deteriorating rapidly, resulting in sizeable losses,” Tyler was quoted as saying in the statement.

But he added that the global picture was “diverse”, with carriers in North and Latin America expected to see improved prospects from 2011, compared with airlines in Europe, the Asia-Pacific and the Middle East.

According to IATA estimates, North American carriers are likely to post profits of US$1.4bil in 2012, a slight improvement on the previous year due to strict management of airline capacity.

Carriers in the Middle East, however, are expected to see profits drop by more than half, as are those in the Asia-Pacific region due in part to slowing Indian and Chinese economies.

Growth in China, the world's second largest economy, slowed to 8.1% in the first quarter of 2012 its slowest pace in nearly three years.

But yesterday, Li Jiaxiang head of China's aviation watchdog detailed ambitious expansion plans for his country's aviation sector, pointing for instance to the planned construction of 70 new airports by 2015.

Li also reiterated that Chinese carriers would buy an average of more than 300 planes a year from 2011 to 2015 the country's current five-year economic plan.

During his speech, Tyler also blasted a controversial carbon tax that the EU is trying to impose on all airlines a move that has sparked a backlash from the United States, China, Russia, India and European carriers.

Airlines flying to, from or within the EU are required to monitor CO2 emissions for entire journeys and, if necessary, pay for exceeding their carbon allowances.

The scheme was “a polarising obstacle that is preventing real progress. Our host country, China, is at the forefront of the opposition to the European ETS (Emissions Trading Scheme). Its carriers are forbidden from participating”, Tyler said. - AFP

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Tuesday June 12, 2012

IATA: Airlines’ 2012 profits to plummet