The European airline industry will go into the red this year, reckons Iata, posting estimated losses of £750m as a whole. Why? Because travellers who would previously tick the cheeky 'upgrade to first/business' box are now making do with cattle class.
As of July this year, Iata's data shows a 2.4% drop in premium bookings on previously lucrative North Atlantic routes, and an even more worrying 3.5% drop in European premium travel. 'European airlines are expected to post the largest loss of any region,' reads the report. 'While governments and the European Central Bank have taken measures to shore up confidence in the euro, these have been fraught with political difficulties.'
Overall, Iata predicts that world airline profits will reach around £2.56bn in 2012, down from £5.25bn last year.
And it's not just the recession that's affecting buying habits. The European airline tax system must shoulder some of the blame. 'The region is plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment,' says Iata. It's getting ever more difficult to price air travel competitively these days.
However, Iata does add that extensive restructuring has left the industry in a much better state than it could have been. 'Even six years ago, generating a profit with oil at $110/barrel (Brent) would have been unthinkable,' says Tony Tyler, IATA’s Director General and CEO. 'The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating.
'But despite these efforts, the industry’s profitability still balances on a knife-edge,' admits Tyler, 'with profit margins that do not cover the cost of capital.'
