May 8, 2024

Airline Trade Group Sees Bigger Profits This Year

PARIS — Worldwide demand for air travel remains well above average, despite clear signs of a broad economic slowdown, an industry group said Tuesday as it substantially raised its profit forecast for the year.

But the deepening debt crisis in Europe and stagnant jobs growth in North America are likely to put the squeeze on both business and leisure travel by the year-end holiday season, the International Air Transport Association said. It said demand was likely to remain weak well into the first half of next year.

The association, which represents most of the world’s airlines, raised its forecast for combined 2011 profit to $6.9 billion, a big improvement from the $4 billion predicted in June. But collective profits in 2012 are likely to drop to $4.9 billion, the trade body said.

“Airlines are going to make a little more money in 2011 than we thought. That is good news,” said Tony Tyler, who took over as the association’s director general in July. “Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement.”

The revised profit forecast for this year is still well below the $8.6 billion the association forecast March 2 — just days before the earthquake, tsunami and nuclear accident in Japan, which has sharply curtailed air travel to Japan, one of the world’s largest economies. That disaster coincided with a series of popular uprisings in North Africa and the Middle East, which led to a surge in oil prices to more than $100 a barrel.

“Even with the extra shocks this year, people are still flying,” Mr. Tyler said.

The new outlooks are a sharp drop from the nearly $16 billion that carriers earned in 2010. Mr. Tyler said that the coming months would be challenging for an industry that has historically delivered profit margins in the low single digits.

“It looks like we are headed for another year in the doldrums,” he said. “Business confidence is declining. It is difficult to see any potential for significant profitable growth.”

Asian airlines are once again expected to deliver the bulk of global profits this year, to the tune of $2.5 billion — although that is a fraction of the $8 billion earned in the region in 2010. The decline was largely the result of a sharp drop in air cargo traffic after the disasters in Japan; the association said it expected a strong rebound later this year and continuing into 2012.

Meanwhile, European carriers have benefited from an increase in inbound tourist traffic, fueled by a relatively weaker euro. But while the region’s airlines are likely to make a profit of about $1.4 billion in 2011, down from $1.9 billion in 2010, that is expected to plummet to just $300 million next year as the effects of government austerity and declining economic growth takes hold.

“A long slow struggle lies ahead,” Mr. Tyler said.

In North America, the association predicted airlines would achieve a collective net profit of $1.5 billion this year, down from $4.1 billion in 2010.

The association, which revises its financial forecast quarterly, represents 230 airlines that account for 93 percent of international air traffic.

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Nuclear Cleanup Plans Hinge on Unknowns

The widely divergent outlooks underscore the basic uncertainties clouding any forecast for Fukushima: when cooling stems will be restored and radiation emission halted; how soon workers can access some parts of the plant; and how bad the damage to the reactors, their fuel, and nearby stored fuel turns out to be. The United States Nuclear Regulatory Commission has warned that at least one reactor’s fuel may even have leaked out of the reactor pressure vessel, something that has never before happened in a nuclear accident.

A global team led by Hitachi said Thursday that it would take at least three decades to return the site to what engineers refer to as a “green field” state, meaning within legal limits of radiation for any residents. Toshiba, Japan’s biggest supplier of nuclear reactors, said it could take as little as 10 years

Both companies have large nuclear-related businesses and appear to be eager to speak about endgame scenarios to a crisis that has heightened global public mistrust over nuclear power. There are also billions of dollars likely at stake in the clean-up, which could help Hitachi and Toshiba buoy their sinking bottom lines. The two said this week that annual profits would fall short of their forecasts because of the widespread disruptions in production and supply chains.

At a roundtable with reporters on Thursday, Toshiba’s chief executive, Norio Sasaki, wielded an inch-thick proposal outlining the dismantlement plan submitted to the plant’s operator, Tokyo Electric Power, last week. Hitachi has presented a competing plan.

The scale and complexity of the challenge is unprecedented. No nuclear reactor has ever been fully decommissioned in Japan, let alone the four certain to be dismantled at Fukushima, after being flooded with seawater to avert meltdowns, and after suffering explosions and other damage. The final fate of the two other reactors there has not been announced, but they too may need to be decommissioned.

The accident at Three Mile Island in 1979 involved just one reactor, and thought there was a partial meltdown of the nuclear fuel rods, the chamber holding them did not rupture. The cleanup there still took 14 years and cost about $1 billion. (Two reactors that continue to operate at the site are set to be decommissioned in 2014.)

Recovery from the disaster at Cherynobyl in 1986, meanwhile, is an example engineers are not eager to study. Following the multiple explosions and fire that sent huge radioactive plumes into the atmosphere, workers covered the remains of the reactor with sand, lead and eventually entombed it with concrete to halt the release of radiation. The concrete coffin still remains at Chernobyl, and the area remains uninhabitable.

For now, workers continue to try to stem leaks of highly radioactive water from the plant even as they add to the flow by continuing to pump in water — now fresh, not salts. They are also are racing to revive the contained cooling systems that circulate water and do not bleed contaminants.

But serious challenges that remain, including what Japan’s nuclear regulator said Thursday were rising temperatures at one of the units , as well as a series of strong aftershocks. Later, Hidehiko Nishiyama, the deputy director-general of Japan’s Nuclear and Industrial Safety Agency, said the situation at the plant remained “difficult.”

Still, Toshiba’s engineers expect the plant to stabilize “in several months,” Mr. Sasaki said, and for full-scale cooling to resume. It would be five years before engineers would be able to open up the pressure vessels to remove the nuclear fuel, he said, and dismantling the reactors and cleaning up radiation at the plant would take at least another five years.

Toshiba’s team includes engineers from Westinghouse, whose majority owner is Toshiba, and the Babcock Wilcox Company, an energy technology and services company that handles the disposal of hazardous materials. The two companies helped shut down the damaged reactor at Three Mile Island.

A Hitachi spokesman in Tokyo, Yuichi Izumisawa, said that the 10-year scenario was overly optimistic. He said that Hitachi’s engineers expect that it will take that long just to remove the nuclear fuel rods from the plant and place them in casks to transport to a safe storage facility.

Only then can dismantling the plant’s structures begin, he said, followed by cleaning up remaining radiation.

Hitachi, the country’s second-biggest supplier of reactors, has a team of 50 experts working on its dismantling plan. It has a joint nuclear venture with General Electric and is also working with the American nuclear operator, Exelon, and Bechtel, the engineering firm.

“You basically need to dismantle the plant from the inside, and the inside is till very radioactive,” he said. “At Hitachi, we are baffled over what kind of technology would allow everything to be finished in 10 years.”

Tetsuo Matsumoto, a professor in nuclear engineering at Tokyo City University, said that how long the decommissioning process would take depended heavily on the state of the nuclear fuel.

“Will it still be shaped like rods? Or will it have melted and collapsed into a big mass?” he said. “It could be 10 years or it could be 30. You just won’t know until you open up the reactor.”

Ken Ijichi contributed reporting.

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