Euro Crisis to Hit European Airline Industry – KPMG

June 12, 2012 /

The International Air Transport Association (IATA) has predicted that the financial crisis currently raging in the Eurozone will likely hit the European airline industry.

James Stamp, partner at KPMG’s transport advisory group, comments: “There is no doubt that the Eurozone crisis is impacting business confidence and therefore the growth prospects of the airline industry. However, we see the market as being quite polarised. Airlines that will struggle are likely to be the smaller airlines lacking scale and network benefits. Genuine low cost carriers should continue to survive and even thrive, as the flexibility of their cost base and the ability to manage capacity gives them the ability to adapt to changing demand patterns.

“Larger legacy airlines will without doubt be impacted by the crisis but those with the most scale and geographic diversity will be able to profit from growing demand by the growth markets in Asia. We also expect further consolidation as well as more sophisticated JVs and alliances among the larger players. Some airlines may be able to capitalise on failures by picking up new routes.

“The outlook for North America and Asia could not be more different. The uplift in profit forecasts in North America and Asia reflects two different forces at play: In Asia, the emerging middle classes and sound economic fundamentals are driving growth, demonstrating the historically strong correlation between GDP per head and number of flights.

“While the economic outlook for North America is weaker, crucially, the airline industry has been through a period of intense consolidation enabling most legacy carriers to drive out costs and improve network efficiencies.”

 

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