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Airline Industry Group Predicts Tough Year

December 8, 2011 by Leave a Comment

The group, the International Air Transport Association, said airlines were finishing 2011 in a weakened position, as sluggish economic growth in many countries sapped demand for air cargo and high fuel costs continued to eat into profits. Still, the group, which represents most global airlines, said it would maintain its forecast for combined profits of $6.9 billion in 2011.

“The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the euro zone sovereign debt crisis,” Tony Tyler, the association’s director general and chief executive, said in a statement.

Using data from a recent forecast by the Organization for Economic Cooperation and Development, the association said it had calculated that a full-blown European financial crisis could cut world gross domestic product growth roughly in half next year, to 0.8 percent. That would have “the potential to cause global industry losses of $8.3 billion,” the group said. It would be the worst performance for the industry since the 2008 financial crisis.

Historically, the association said, global G.D.P. growth rates of less than 2 percent have resulted in net losses for the airline industry.

“In this scenario, airlines would see growth in passenger demand grind to a halt and a 4.7 percent contraction in cargo markets,” it said. “Both passenger and cargo yields would fall by 1.5 percent.”

European airlines would be hardest hit, accounting for more than half of the total estimated loss, the association said.

North American airlines would be expected to lose $1.8 billion in 2012, while losses in Asia could reach $1.1 billion. Middle Eastern and Latin American airlines would each be predicted to lose $400 million, while African airlines would lose $200 million.

“This admittedly worst-case — but by no means unimaginable — scenario should serve as a wake-up call to governments around the world,” Mr. Tyler said.

Even if European leaders avert a renewed financial crisis, Europe probably would have at least a brief recession, the group said. In that case, the group forecast that profits would shrink 50 percent in 2012 to $3.5 billion.

Despite rapid growth in passenger traffic this year, European airlines are in a challenging position heading into any slowdown.

Competition between low-cost and traditional airlines is intensifying and squeezing already narrow profit margins. Europe’s airlines are expected to generate a collective profit of just $1 billion in 2011, down from a previously forecast $1.4 billion.

In the best case, those figures probably will slip into losses of $600 million in 2012, the association said, adding that declining demand probably would be worsened by expected increases in taxes charged to passengers. If the euro collapses, Europe’s airlines would be expected to lose $4.4 billion.

British Airways on Tuesday blamed an increase in Britain’s airport departure tax for its decision to cut back a planned 2012 expansion to its schedule that would have involved the addition of 800 workers.

If a full-blown crisis is avoided in Europe, global passenger demand would be expected to grow 4 percent next year, slightly below the long-term annual average of 5 percent, the association said.

North American airlines, which are expected to have profits of about $2 billion this year, would probably generate profits of $1.7 billion in 2012.

The Asia-Pacific region, which has been spared the brunt of the global slowdown, is expected to earn $3.3 billion in 2011, although that probably would decline to $2.1 billion next year under the best projection.

This article has been revised to reflect the following correction:

Correction: December 7, 2011

An earlier version of this article said that the O.E.C.D. had recently forecast that a full-blown European financial crisis would cut global gross domestic product growth to 0.8 percent in 2012. That figure was actually a projection made by the I.A.T.A., based on O.E.C.D. data and its own calculations.

Article source: http://www.nytimes.com/2011/12/08/business/global/airline-industry-group-sees-tough-year-ahead.html?partner=rss&emc=rss

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Airline Industry Group Sees Tough Year Ahead

December 7, 2011 by Leave a Comment

PARIS — Any collapse of the euro risks also squelching growth in global air traffic next year, a scenario that could push airlines into a collective loss of more than $8 billion — the worst since the 2008 financial crisis, an industry group said Wednesday.

The International Air Transport Association said airlines were finishing 2011 in an already weakened position, as sluggish economic growth in many countries saps demand for air cargo and high fuel costs continue to eat into profit margins.

Still, the Geneva-based group, which represents most global carriers, said it would maintain its forecast for combined profits of $6.9 billion in 2011.

“The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis,” Tony Tyler, the I.A.T.A.’s director general and chief executive, said in a statement.

A recent forecast by the Organization for Economic Cooperation and Development predicted a full-blown European financial crisis would cut global gross domestic product growth to 0.8 percent in 2012. Based on that, the I.A.T.A. said this had “the potential to cause global industry losses of $8.3 billion.”

Historically, the group said, global G.D.P. growth rates of below 2 percent have resulted in net losses for the airline industry.

“In this scenario, airlines would see growth in passenger demand grind to a halt and a 4.7 percent contraction in cargo markets,” it said. “Both passenger and cargo yields would fall by 1.5 percent.”

European airlines would be hardest hit, accounting for more than half of the total estimated loss, the I.A.T.A. said.

North American carriers would be expected to lose $1.8 billion in 2012, while the losses in Asia could reach $1.1 billion. Middle Eastern and Latin American carriers would each be predicted to lose $400 million, while African airlines would see losses of $200 million.

“This admittedly worst-case — but by no means unimaginable — scenario should serve as a wake-up call to governments around the world,” Mr. Tyler said.

Even if European leaders manage to avert a renewed financial crisis, it is likely that Europe would experience at least a brief recession, the I.A.T.A. said. In that case, the group forecast that profits would shrink by 50 percent in 2012 to $3.5 billion.

Despite seeing rapid growth in passenger traffic this year, European airlines are in a challenging position heading into the slowdown.

Fierce competition between low-cost carriers and traditional airlines is intensifying and squeezing already narrow profit margins. Europe’s carriers are expected to generate a collective profit of just $1 billion in 2011, down from a previously forecast $1.4 billion.

In the best case scenario, those figures will likely slip into losses of $600 million in 2012, the I.A.T.A. said, adding that falling demand would likely be exacerbated by expected increases in taxes charged to passengers. In a worst-case of a euro collapse, Europe’s airlines would be expected to see losses of $4.4 billion.

British Airways on Tuesday blamed an increase in Britain’s airport departure tax for its decision to cut back a planned 2012 expansion to its schedule that would have involved the recruitment of 800 new staff members.

If a full-blown crisis is avoided in Europe, global passenger demand would be expected to grow by 4 percent next year, slightly below the long-term annual average of around 5 percent, the I.A.T.A. said.

North American carriers, which are expected to see profits of around $2 billion this year, would likely generate slightly lower profits of $1.7 billion in 2012.

The Asia-Pacific region, which has been spared the brunt of the global slowdown, is expected to earn $3.3 billion in 2011, although that would likely slip to $2.1 billion next year under the best-case scenario.

Article source: http://feeds.nytimes.com/click.phdo?i=776cf2ea193a4ae77d4229a5caaf09dc

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Boeing Raises Forecast for Sales by 8.5%

June 17, 2011 by Leave a Comment

The plane maker predicted that airlines would buy 33,500 new jets through 2030. That represented an increase of 8.5 percent from its previous forecast of 30,900 planes, made last July as airlines were just beginning to emerge from a downturn set off by the 2008-9 financial crisis.

Boeing, based in Chicago, said that the new orders would be worth $4 trillion, up 11 percent from the $3.6 trillion forecast a year ago.

“Not only is there a strong demand for air travel and new airplanes today,” said Randy Tinseth, vice president for marketing at Boeing’s commercial airplanes division, “but the fundamental drivers of air travel — including economic growth, world trade and liberalization — all point to a healthy long-term demand.”

The 20-year forecast from Boeing was announced in advance of the Paris Air Show, which opens Monday at Le Bourget Airport.

Airbus in December predicted sales of 26,000 commercial planes through the end of 2029, with a market value of $3.2 trillion.

The International Air Transport Association, a trade group based in Geneva, predicted this month that carriers would report a collective profit of about $4 billion this year after recording a $18 billion profit in 2010. The industry lost a combined $26 billion in the 2008-9 period.

Boeing predicted that global gross domestic product growth would average about 3.3 percent a year over the next 20 years, with the economies of China and India each expected to expand by about 7 percent annually. Global air traffic was likely to continue growing at an average yearly rate of just over 5 percent. Within the Asia-Pacific region, air traffic was likely to grow by an average of 7 percent a year, Boeing said, compared with just 2.3 percent annual growth within North America and 4 percent in Europe.

“We expect passenger traffic to almost triple over the next 20 years, while cargo will more than triple,” Mr. Tinseth said.

The majority of new aircraft sales — about 70 percent — would be of single-aisle planes like the Boeing 737 and the Airbus A320, which normally seat about 150 to 200 passengers, Boeing said. Twin-aisle wide bodies like Airbus’s planned A350-XWB and the coming Boeing 787 Dreamliner would represent about 22 percent.

The single-aisle segment is the most hotly contested for both Boeing and Airbus, which each claim about 50 percent of the market. But the two companies are expected to begin to face competition at the beginning of the next decade when other manufacturers — including Bombardier of Canada and Embraer of Brazil — are expected to start deliveries of jets that can seat similar numbers of passengers.

Article source: http://feeds.nytimes.com/click.phdo?i=2f5d59172902417c8a73f8951e8d44bc

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