Profits of Mideast airlines scaled down

Middle East airlines are expected to earn profits of $400 million (Dh1.47 billion) in 2011, down from an initially forecast $800 million, as rising fuel costs hit carriers across the globe, the International Air Transport Association (IATA) said yesterday. The aviation trade body also revised downward the industry outlook for 2012, anticipating that the Middle East carriers will post profits of $300 million, less than half the previously forecast $700 million profit, as long-haul market conditions deteriorate, in particular those linked to the weak European economies. Overall, IATA said that for 2011, global profitability remains "weak but unchanged" at $6.9 billion for a net margin of 1.2 per cent. Looking ahead to 2012, the industry body downgraded its central forecast for airline profits from $4.9 billion to $3.5 billion for a net margin of 0.6 per cent as Eurozone crisis pose the biggest risk to the industry's profits. Industry revenues are expected to grow by 3.7 per cent to $618 billion in 2012, and as per estimates, this will be outstripped by cost increases of 4.5 per cent to $609 billion. In a worst-case scenario, IATA estimates that the global aviation industry could suffer losses "exceeding $8 billion" in the coming year should the Eurozone crisis evolve into a full-blown banking crisis and recession. "The biggest risk facing airline profitability over the next year is the econ-omic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis. Such an outcome could lead to losses of over $8 billion — the largest since the 2008 financial crisis," said Tony Tyler, IATA's Director General and CEO.