Monday, October 3, 2011

Airline industry profits to fall by US$2b in 2011

KUALA LUMPUR:''Airlines are expected to see total industry profits shrink to US$4.9 billion in 2012 from US$6.9 billion in 2011 as the global economy slows and demand wanes, according to the International Air Transport Association (IATA).

Its director general and chief executive officer Tony Tyler said that the industry had shifted gears downward, explaining that pace of growth in passenger markets had dipped and the freight business was now shrinking at a faster pace.

It said in a statement Monday, Oct 3, Tyler said that with business and consumer confidence continuing to slump globally there was not a lot of optimism for improved conditions any time soon.

IATA said that although passenger demand was up 4.5% over August 2011, it was still indicative of a slowdown from the 6% recorded in July 2011.

The decline in freight markets had accelerated, with the 3.8% contraction recorded in August more than two times the pace of July's 1.8% decline, it said.

The total passenger market dropped by 1.6% in August, compared to July, it said.

IATA said international markets fell by 1.5% while the already weak domestic markets shrank by 1%, adding that the total cargo market fell by 1.3%.

According to IATA, August traffic results were in line with expectations for a decline in profitability heading into 2012.

Historically, the airline industry has delivered collective losses when GDP growth falls below 2.0%.

GDP growth has fallen from 3.9% in 2010, to an expected 2.5% this year and 2.4% is projected for 2012, it said.

'Economic uncertainty owing to the European sovereign debt crisis and the growing likelihood of a protracted period of slow growth in developed economies mean the industry will be even more focused on reducing costs and improving efficiency.

'To ensure that airlines can continue to catalyze economic activity, we need governments to review the often onerous tax burden that they place on aviation,' said Tyler.

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