EU crisis threat to African airlines

Geneva - A full-blown banking crisis and recession in the European Union could lead to a crippling slowdown in the aviation industry and losses of more than $8bn in 2012, the International Air Transport Association (IATA) said on Wednesday.

This would cause severe damage to an industry under already under enormous pressure and African airlines losses are likely to double to $200m.

IATA announced its latest forecast for the industry for 2012 on Wednesday but also said that it had developed a second scenario for 2012, taking into account the possibility of the eurozone crisis deepening.

The second scenario is based on global gross domestic product (GDP) growth falling to 0.8% in 2012, driven by Europe descending into a deep recession.

Tony Tyler, secretary general and CEO of IATA, said in this second scenario, all regions would fall into losses next year.

Currently IATA forecasts profits for the industry for 2012 of $3.5bn.

"In the second scenario, Europe would be expected to post the deepest losses at $4.4bn, followed by North America at $1.8bn and Asia-Pacific at $1.1bn. The Middle East and Latin America would both be expected to post $400m losses, while Africa would be $200m in the red."

Under the first scenario African carriers are expected to make a loss of $100m next year.

“This admittedly worst-case—but by no means unimaginable—scenario should serve as a wake-up call to governments around the world," said Tyler.
"In a good year, the airline industry does not cover its cost of capital, much less in a bad one. But in a bad year, aviation’s ability to deliver connectivity and keep the heart of the global economy pumping becomes even more vital to initiating a recovery."

Government policies need to recognise aviation’s contribution to the health of the economy, he added.

Historically, GDP growth rates below 2.0% have resulted in the airline industry producing a net loss.
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