Eurozone crisis to hit global airlines hard

The Eurozone crisis is turning out to be the biggest threat to the profitability of global aviation industry, with airlines in Asia-Pacific expected to post losses worth $1.1 billion out of a total industry loss of $8.3 billion next year, global airlines body IATA has said.

With the European sovereign debt crisis "deteriorating into a renewed banking crisis", the International Air Transport Association (IATA) said in this scenario, airlines in all the regions would fall into losses in 2012.

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Europe would be expected to post the deepest losses at $4.4 billion, followed by North America at $1.8 billion and Asia-Pacific at $1.1 billion.

The Middle East and Latin America would both be expected to post $400 million losses, while Africa would be $200 million in the red.

Given this scenario which is estimated to cut global GDP growth to 0.8 per cent, "we estimate that this has the potential to cause global industry losses of $8.3 billion," IATA's chief economist Brian Pearce said in Geneva.

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Earlier, IATA Director General Tony Tyler said this was "admittedly worst-case but by no means unimaginable - scenario should serve as a wake-up call to governments around the world".

"In a bad year, aviation's ability to deliver connectivity and keep the heart of the global economy pumping becomes even more vital to initiating a recovery.

Government policies need to recognise aviation's vital contribution to the health of the economy," Tyler said.

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Painting a gloomy picture for the entire sector next year, Pearce told PTI that airlines would see growth in passenger demand "grind to a halt and a 4.7 per cent contraction in cargo markets. Both passenger and cargo yields would fall by 1.5 per cent".

However, there would be "some relief" in the fuel prices with the jet fuel bill likely to stabilise at $85 per barrel.

"Even our best case scenario for 2012 is for a net margin of just 0.6 per cent on revenues of $618 billion," Pearce said, adding that the industry was really moving at double speed with highly taxed European carriers heading into the red.