Global airline profits expected to drop below 1% next year, industry official says

Beset by high fuel costs and the uncertainty of European regulatory hurdles, the global profit forecast for the airline industry looks particularly grim next year, the head of the international airline trade association said Wednesday in Washington.

The world’s airlines will make less than a 1 percent profit in 2012, down from a projected 1.2 percent margin this year and 2.9 percent in 2010, Tony Tyler, director of the International Air Transport Association, said at a meeting of Washington’s International Aviation Club.

“The high price of oil and an anemic economic outlook are the biggest issues,” Tyler said. “If we are right about 2012, it will mean that airlines, since 2001, lost $25 billion on $5.5 trillion in revenues.”

The association represents about 230 airlines, including most of the major U.S. carriers.

The picture has been clouded by a European plan to impose an emissions tax on aircraft flying to and from its airspace.

“The airline industry has long opposed this because regional schemes will distort markets and open the door to a patchwork approach,” he said.

The United States is at the forefront of nations opposed to the European Union plan. The House voted last month to ban U.S. carriers from paying the emissions tax.

Under a tax scheme scheduled to take effect Jan. 1, the E.U. aviation tax would apply to any aircraft that flies in or out of an E.U. airport, even if the time it spends in E.U. airspace is minimal. The tax would be paid to the country to which an airline flies most frequently, and although it has been promoted as an environmental tax there is no requirement that the revenue be spent on environmental programs.

“Reducing aviation emissions is a goal that is worth pursuing, but the E.U.’s go-it-alone approach will fly in the face of the international community and is not the way to find an international solution to an international problem,” said Rep. Nick J. Rahall (D-W.Va.), ranking member on the House Transportation Committee.

In testimony before that committee in July, the U.S. Air Transport Association estimated the tax would cost U.S. airlines more than $3.1 billion between 2012 and 2020.

The tax also has drawn objection from Argentina, Brazil, Chile, China, Colombia, Cuba, Egypt, India, Japan, South Korea, Malaysia, Mexico, Nigeria, Paraguay, Qatar, Russia, Saudi Arabia, Singapore, South Africa and the United Arab Emirates.

Ashley Halsey reports on national and local transportation.
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