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Global Airlines' 2012 Profit Forecast Reduced by IATA on Euro Debt Crisis

December 7, 2011 | Hogan Keyser
December 7, 2011 by Alex Webb via Bloomberg.com -- The airline industry's (DAL) profit next year will fall 49 percent, more than predicted earlier, as the sovereign-debt crisis in the euro region hurts economic growth, the International Air Transport Association said.

Net income will drop to $3.5 billion in 2012 from $6.9 billion this year, with the profit margin narrowing to 0.6 percent of sales from 1.2 percent, IATA Chief Executive Officer Tony Tyler told reporters in Geneva. The trade group forecast in September that global airline earnings in 2012 would total $4.9 billion. The industry may be unprofitable next year should the debt crisis "spiral out of control," IATA said.

"In the past, whenever we've seen a small decline in travel markets caused by an economic deterioration, it's very difficult for other markets to uncouple," IATA Chief Economist Brian Pearce said at the news conference. "Problems in Europe are likely to affect the rest of the world."

European Union leaders are scheduled to meet Dec. 8-9 in a new push to stave off debt defaults by some governments in the region. Even a "relatively benign outcome" to the crisis will involve a short recession in Europe, IATA said in a statement today. Airlines in the region may report "small" losses next year, in contrast to North American and Asian carriers maintaining or raising earnings, the association said.

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