First-class fall in airline profits

A fall in the number of first class and business class passengers is likely to push European airlines into the red this year, it has been forecast.

European carriers are expected to post combined losses of around £750 million in 2012, the International Air Transport Association (Iata) has predicted.

Iata said that in July, on the lucrative North Atlantic routes, first class and business class travel – known as premium travel – was 2.4% down on the same time last year. It added that within Europe in July 2012 premium travel was down 3.5%.

Iata said: “European airlines are expected to post the largest loss of any region. While governments and the European Central Bank have taken measures to shore up confidence in the euro, these have been fraught with political difficulties.

“Additionally, the region is plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment.”

Overall, Iata predicted that world airline profits will reach around £2.56 billion in 2012 – a dip on the 2011 figure of around £5.25 billion in 2011 but higher than Iata’s forecast for this year made in June 2012.

Iata’s forecast for Europe will intensify UK airlines’ call for a reduction or scrapping of the UK’s Air Passenger Duty (APD) airport departure tax which has increased steadily since its introduction in 1994.

Speaking in Singapore, Iata director general and chief executive Tony Tyler said: “Aviation has an important role to play as the global economy struggles. Growth is the only way forward and a healthy aviation industry can stimulate that – linking stagnating developed economies to robust emerging markets.

“Aviation connectivity spurs growth at both ends. That is why it is important for governments to ensure aviation’s ability to be a catalyst for growth is not constrained.

“Unfortunately, in many parts of the world, it is an uphill struggle with high taxes, onerous regulation and insufficient infrastructure. All of this stunts industry growth to the detriment of the world economy.”

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