Iata almost doubles loss forecast for European airlines

Plane leaving Newcastle Airport The airline sector has been hit hard by slowing global growth and rising costs in recent years

The International Air Transport Association (Iata) has almost doubled its forecast for losses at European airlines to $1.1bn (£706m) for 2012.

It said that the rapidly deteriorating business environment in the region was hurting growth.

The association had previously forecast a loss of $600m.

Iata also warned that the eurozone debt crisis could escalate further and have an adverse impact on the airline industry.

"With little clarity on how European governments will manage the situation beyond providing further liquidity, the risk of a major downward shift in economic prospects is very real," said Tony Tyler, director general of Iata.

"The next months are critical and the implications are big," he added.

In its latest projection, Iata added that European carriers were also being hurt by "high and rising tax regimes, inefficiencies in air traffic management, and the high cost of complying with poorly thought-out regulations".

'Standing in the way'

Start Quote

The eurozone crisis is standing in the way of improved profitability”

End Quote Tony Tyler Iata

Meanwhile, Iata kept its profit forecast for the global airline industry unchanged at $3bn for 2012.

This was after an upward revision in profits at North American and Latin American airlines helped offset the cut in European and Asia-Pacific carriers.

The association said that the sector had also benefited from the recent drop in fuel prices, which make up almost 40% of an airline's overall costs.

The price of Brent crude oil has dropped to below $100 a barrel recently, from more than $120 a barrel earlier in the year.

At the same time, demand, especially in emerging economies, has also picked up in the first half of the year.

However, Iata warned that growth might slow in the second half of the year "as deepening problems in Europe damage confidence" and hurt earnings.

"The eurozone crisis is standing in the way of improved profitability," said Mr Tyler.

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