Airline carriers from the Asia Pacific region are expected to contribute US$ 2 billion to global industry profits for the year 2012 as compared with US$ 4.9 billion in 2011, despite a previous US$ 0.3 billion downgrade in profits as a result of a weak first quarter, according to a report from the International Air Transport Association (IATA).
Asian carriers make up about 40% of the global air cargo business and the weakness of this market in 2011 was the reason why there was a large decline in the region's profits.
Lower growth in Chinese and Indian economies was also cited as contributing factors to the slow industry growth environment.
Nevertheless, the region is expected to benefit from stronger growth in aggregate passenger and cargo traffic this year, as a result of the rebound in demand in the Japan market, following the tsunami and earthquake last year.
Despite lowered profits, as compared with the last two years, the Asia Pacific region was projected to make the largest contribution to global industry profits as other regions, particularly Europe, are expected to see leaner times as the euro crisis deepens.
Regional demand is expected to grow at 3.9%, above the anticipated 3.3% growth in capacity, providing some protection to airline profits.
“There has been no let-up in the volatility of the economic environment. A few months ago, an oil price crisis was the biggest risk. Now all eyes are back on Europe. 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,” Director General and CEO, IATA, Tony Tyler said.
“The $3.0 billion industry profit forecast has not changed. But almost everything in the equation has. Demand has been better than expected, so far this year. And fuel prices are now lower than previously anticipated, but that's on the expectation of economic weakness ahead. The eurozone crisis is standing in the way of improved profitability,” he added.