European airlines on course to lose $1.2bn

European airlines are expected to post the largest loss of any region in the world at $1.2 billion this year – $0.1 billion worse than previously forecast.

The prediction came as Iata revised its forecast for global aviation for 2012.

Airlines are expected to earn $4.1 billion this year, up $1.1 billion from the $3 billion forecast in June but still less than half the $8.4 billion achieved in 2011.

The revision will still see the industry’s net profit margins fall from the 1.4% in 2011 to 0.6% – up from the previously forecast 0.5%.

The association predicted global profits will rise modestly next year to $7.5 billion, though this is a net margin of just 1.1%.

Iata said carriers in Europe were “plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment”.

Director general and chief executive Tony Tyler said: “The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth.

“While some of these risks have diminished slightly over recent months, they continue to take their toll on business confidence. The outlook improvement is due to airlines performing better in a difficult environment.”

He added: “Even six years ago, generating a profit with oil at $110/barrel (Brent) would have been unthinkable.

“The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating. But despite these efforts, the industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital.”

Overall airline revenues are expected to grow by $24 billion to $660 billion next year.

European airlines are expected to be the only region in the red for 2013, although losses will be trimmed as a result of slower capacity growth and improved global trading conditions on long-haul markets.

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