How Much Money Can Airlines Lose?

The International Air Transport Association almost doubled its 2012 loss forecast for European airlines and said the continent’s debt crisis could wipe out an expected global profit.

Carriers in Europe may lose $1.1 billion this year, compared with a March forecast for a $600 million loss, the airline body said today at its annual meeting in Beijing. It reiterated a forecast for a $3 billion global profit. The worldwide estimate could be reduced if the European economy worsens more than expected, the group said.

“If there’s a full-blown crisis, all bets are off,” Tony Tyler, head of IATA, which represents about 240 carriers, said in a Bloomberg TV interview yesterday. “It will have a big impact on the world economy and a huge impact on airlines.”

Global profits are already set to fall from $7.9 billion last year, as recessions in the U.K., Spain and other European countries damp demand and erode gains from lower fuel prices. Deutsche Lufthansa AG (LHA), Air France-KLM (AF) Group and International Consolidated Airlines Group SA (IAG), Europe’s three biggest full- service carriers, have all announced plans to cut staff or restructure operations following first-quarter losses.

IATA cut its forecast for Asia-Pacific carriers’ earnings to $2 billion from $2.3 billion. Slower growth in China and India are also damping travel, the group said.

IATA raised its profit forecast for North American carriers to $1.4 billion from $900 million. The airlines will boost earnings from $1.3 billion last year as they refrain from adding many flights amid a 0.5 percent growth in demand, the slowest pace worldwide, the group said.

Complete Article & Source: http://www.businessweek.com/news/2012-06-10/iata-doubles-europe-loss-forecast-sees-threat-to-global-profit