Airlines: huge Asia Pacific growth, oil price impact are concerns

Switzerland and airlines – Zurich Airport shows strong growth, China Air has Beijing-Geneva project

Airline industry could dip into the red if oil prices continue to rise

GENEVA, SWITZERLAND – “it will not take much of a shock to push the industry into the red for 2012,” says Tony Tyler, chief executive of Iata (International Air Transport Association).

The Geneva-based airline industry group Tuesday 20 March announced a downgrade to its growth forecast for 2012, citing the rise in oil prices.

Iata said in a statement that it “expects airlines to turn a global profit of $3.0 billion in 2012 for a 0.5% margin. This $500 million downgrade from the December forecast is primarily driven by a rise in the expected average price of oil to $115 per barrel, up from the previously forecast $99.

Several factors prevented a more significant downgrade: (1) the avoidance of a significant worsening of the Eurozone crisis, (2) improvement in the US economy, (3) cargo market stabilization and (4) slower than expected capacity expansion.”

Estimated profits for 2011 are now expected to be $7.9 billion,  up from an earlier forecast of $6.9 billion, largely due toa  “much better than expected performance of Chinese carriers.”

Regional imbalances growing

China Air is reported by RTS public broadcasting to have a project in the pipeline for a direct Geneva-Beijing flight, although it is not yet clear when this will happen. There are currently direct flights from Zurich to Beijing but not from Genev. The new route is one more indication of a trend: growing differences between regions,with Europe and Africa while Asia-Pacific booms.

Asia-Pacific airlines are forecast by Iata “to again deliver the largest absolute profit–$2.3 billion—which is $200 million more than estimated in December. Higher fuel costs will more than halve profits this year but the region’s relatively strong economies will continue to generate more rapid growth in travel and cargo than the other large regions.”

A report issued 21 March at the Aviation and Cargo Summit in Geneva notes for the region that “forecasts indicate that passenger numbers are expected to almost triple from 779.6 million in 2010 to over 2.2 billion in 2030. Meanwhile, cargo volumes are projected to rise at a similar rate of 6.3% per annum.”

Zurich’s traffic up

In Swiss airline industry news, Zurich Airport last week published February figures showing that 1,694,143 passengers were handled, up 4.4 percent compared to February 2011. Year to date passenger growth is +2.8 percent.