Airlines Cling to Profit Outlook, Wary on Europe

Global airlines maintained their profit forecast for 2012 on Monday but the industry was braced for Europe's debt crisis to worsen and wipe out the benefit of cheaper oil.

The International Air Transport Association (IATA) left this year's global airline profit forecast unchanged at $3 billion, or 0.5 percent of industry revenues, at a summit of airline chiefs being held this year in Beijing.

That stable outlook, however, masks a widening gap between regions with only North and South America set to improve, as well as worries that cargo traffic might take a hit from the economic crisis spilling over from Europe.

The outlook echoed expectations previously reported by Reuters. The Geneva-based grouping of some 240 airlines regularly issues forecasts for an industry whose activities are seen as a barometer of indicators such as business confidence and trade.

Director General Tony Tyler told IATA's annual meeting that business was improving for American carriers, many of whom have been keeping a tight lid on capacity.

"The rest of the world is seeing reduced profitability. For European carriers, the business environment is deteriorating rapidly resulting in sizable losses," Tyler said. The pessimism stems mainly from the worsening debt crisis in Europe, he noted.

As the industry gathered at the weekend, euro zone finance ministers agreed to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks. On Monday, China said it hoped the move would help contain Europe's debt crisis.

The head of one of Europe's largest airlines, Dutch KLM, meanwhile, urged the region's leaders give a rapid signal of confidence to help dispel the effects of the European financial crisis.

"I hope they solve (the crisis) rapidly or that we see clear messages that confidence is coming," KLM's chief executive Peter Hartman told Reuters on the sidelines of the IATA meeting.