How would a banking crisis hurt airlines?

IATA forecast for 2012 cuts profits from $4.9 to $3.5 billion

IATA reports in its latest airline industry forecast (December) that overall performance during 2011 has been “reasonably good” so far and that it is leaving its $6.9 billion profit forecast for the year unchanged. But the outlook for 2012 has deteriorated, it says. The extent of this depends critically on whether the eurozone crisis is resolved.
If it is, and a banking crisis is averted, then regional divergence is still expected, with European airlines reporting small losses and airlines in North America and Asia seeing a better performance. However, even if the crisis is resolved it will not prevent a short-lived European recession and IATA has cut its forecast for 2012 profits from $4.9 billion to $3.5 billion.
If a banking crisis does occur, bank credit would dry up, asset markets would fall and a deep European recession would pull other markets around the world lower too. Airline losses could then exceed $8 billion.
The New York Times
[photo courtesy Lufthansa]


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