IATA says weak economy will cut 2012 airline industry profit

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The International Air Transport Association (IATA) forecast a 29 percent fall in 2012 industry-wide profit on the back of a weak global economy and stubbornly high jet fuel prices.

The 230-member IATA, whose members carry more than 93 percent of scheduled international air traffic, said on Tuesday it expected industry profits of $4.9 billion in 2012, compared to a revised 2011 forecast of $6.9 billion.

The group raised its 2011 estimate from a previous forecast of $4.0 billion it made in June, citing stronger-than-expected growth in the first half of 2011, Reuters reports.

The forecast is closely watched by analysts and economists as it provides guidance to the strength of cyclical recovery in developed markets and growth in emerging economies, which rely heavily on air transport.

Airlines rebounded faster than expected from recession last year, helped by higher traffic and a drive to keep a lid on spare capacity. But a series of external shocks and higher oil prices have hit the industry hard this year.
“The overall industry outlook grows weaker in 2012. Debt-burdened Western economies look set for an extended period of weak economic growth,” the association said in a statement.
“The fourth quarter of 2011 and the first half of 2012 may well see the weakest point of air transport markets.”



IATA said relatively stronger economic growth and a rebound in cargo will help Asia-Pacific airlines to maintain their 2012 profits close to 2011 levels at $2.3 billion, while the rest of the sector, especially in Europe, will see declining profitability.