IATA predicts downturn in 2008
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The International Air Transport Association (IATA) says challenges for next year would be tougher for the industry and has cut the estimates for the industry’s profit for next year. While the industry is set to make US$5.6 billion this year, the forecast for next year is down to US$5 billion. This is sharply down from its previous forecast of US$7.8 billion.
“The challenges get tougher in 2008,” said Giovanni Bisignani, IATA’s Director General and CEO.
He said while a favourable economic environment and efficiency measures helped mitigate the impact of high fuel prices, things are changing with the credit crunch.
“The peak of the business cycle is over and we are still US$190 billion in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall,” said Bisignani.
While leading in absolute profitability in both 2007 and 2008, North American carriers will see the largest fall in profitability from US$2.7 billion in 2007 to US$2.2 billion in 2008. With 35% of the fleet over 25 years old, the impact of high fuel prices is greater than in other regions, IATA said.
“Moreover, the region is at the centre of the credit crunch.”
European and Asian carriers will see minor drops in profitability of US$100 million each to US$2 billion and US$600 million respectively.
“Robust traffic growth to and within Asia is expected to partially insulate carriers from the impact of the crunch,” IATA said.
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