Airlines told to brace for tough times

HONG KONG: The International Air Transport Association (IATA) warned of tough times ahead for the airline industry and the head of Thai Airways said the financial market turmoil was “frightening”. IATA director-general and chief executive Tony Tyler also said the European Union’s carbon emission trading system would add to the financial pressures on airlines despite an offer of free permits, which he criticised as “linguistic gymnastics”.

IATA has already warned that a weak global economy would prompt a 29% fall in airline profits in 2012 and cut the industry’s profit margins to a wafer thin 0.8% from 1.2% this year. “There is so much uncertainty over the world economy, obviously in Europe and the United States,” Tyler said at a media briefing.

IATA, whose 230 members carry more than 93% of scheduled international air traffic, forecast global economic growth of 2.4% in 2012, lower than the International Monetary Fund’s projection of 4%. “We are not seeing a recession,” said Tyler. Still, global growth is closely tied to the financial performance of airlines. Whenever growth slipped below 2%, the airline industry lost money, IATA said.

IATA forecasts industry profits in 2012 will fall 29% to US$4.9bil from US$6.9bil this year. Volatility in financial markets in the past week has put more pressure on the aviation industry. “The recent market meltdown is really frightening,” said Thai Airways International Pcl president Piyasvasti Amranand. “Economies in Europe and the United States are really slowing down,” he said.

Meanwhile, Cathay Pacific Airways Ltd, the world’s largest international air-cargo carrier, is “very worried” about the fourth quarter because industry freight volumes may fall more than 10% from last year. “There is a big black cloud in front of us,” chief operating officer Ivan Chu told reporters yesterday in Hong Kong, where the carrier is based. “We are very worried.” – Agencies