11 June 2012 16:38 [Source: ICIS news]
LONDON (ICIS)--European airlines are expected to post losses totalling $1.1bn (€880m) in 2012, almost double the $600m previously forecast in March, according to a report published by the International Air Transport Association (IATA) on Monday.
Increased losses have been forecast as markets deteriorate because of the eurozone economic crisis, with demand growth expected to decrease from 6.7% in 2011 to 2.3% in 2012.
“Markets are expecting the eurozone sovereign debt crisis to intensify and economic damage to follow. But with little clarity on how European governments will manage the situation beyond providing further liquidity, the risk of a major downward shift in economic prospects is very real. The next months are critical and the implications are big,” said IATA director general and CEO Tony Tyler.
In addition, the association believes that European airline profits are being negatively impacted by inefficient air traffic management, rising taxes and poorly thought out regulations.
Although a recent softening of crude oil prices has resulted in lower jet fuel prices, the IATA says that fuel is still likely to account for 33% of airline operating costs.
Furthermore, the IATA says the downward trend in crude oil values could soon reverse, should the ongoing dispute between Iran and the west worsen, prompting concerns over crude oil supply to re-emerge.
Jet kerosene prices are currently at $902.50–904.50/tonne CIF (cost, insurance and freight) NWE (northwest Europe), according to the latest ICIS data.
($1 = €0.80)
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