Europe under fire over ‘onerous’ taxes as airlines face £750m loss

By SCOTT REID
Published on 02/10/2012 00:00

Aviation industry leaders have launched a scathing attack on European governments and regulators as airlines operating across the region nurse a collective loss of almost £750 million.

Releasing revised forecasts yesterday, the International Air Transport Association (IATA) said Europe was “plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment”.

The body, which represents some 240 airlines accounting for 80 per cent of global traffic, said European carriers were poised to post the largest loss of any region in 2012.

The combined figure of $1.2 billion (£743m) is worse than previously expected and comes despite a brighter outlook elsewhere, including Asia.

The IATA forecast for Europe will intensify UK airlines’ call for a reduction or scrapping of the Britain’s air passenger duty (APD) 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.”

The Geneva-based group now expects the $630bn global industry to bank a net profit of $4.1bn this year, up from an earlier forecast of $3bn but still less than half the $8.4bn banked in 2011.

In its first forecast for 2013, IATA predicted that industry profits would recover further, to a combined $7.5bn, helped by passenger traffic expansion of 4.5 per cent and cargo growth of 2.4 per cent as the global downturn eases. Profit margins will remain razor-thin, however, at just 1.1 per cent.

“The outlook improvement is due to airlines performing better in a difficult environment,” added Tyler. “The European sovereign debt crisis lingers on. China continues to moderate its growth and the impact of recent quantitative easing in Japan and the US will take time to yield growth.”

Yesterday’s report revealed that, in July, on the lucrative North Atlantic routes, first-class and business-class travel – premium traffic – was 2.4 per cent down on the same time last year. Within Europe, premium travel was down by 3.5 per cent.

In August, British Airways-owner IAG warned of fresh job losses after Spain’s economic crisis and “deep and structural” problems at Spanish carrier Iberia plunged the group into the red.

A further rise in fuel costs added to the headache at IAG, which was formed from the 2011 merger of BA and Iberia. Results revealed an operating loss of €253m (£200m) for the six months to 30 June, compared with profits of €88m a year earlier.

Budget carrier Ryanair enjoyed record profits of €503m last year but expects profits to be lower in 2012 after being hit by rising fuel prices.