Slight abatement in the eurozone crisis in shape of ECBs restrictive promise of buying the debt of Spain and other troubled governments, monetary easing in the US and Japan, and softening of the oil prices are some of the minuscule signs of hope for the global aviation in 2013, according to IATAs latest financial forecast.
The upward revision for the profits of this mammoth industry to 4.1 billion dollars in 2012 from three billion dollars earlier is a tiny improvement. And coupled with easing average oil prices and governments, profits of the industry are forecasted to see moderate recovery in 2013.
As oil prices climbed from 79 dollars a barrel to average 110 dollars in 2012 so far, and world trade receding from 14 percent to three percent since 2010, some might opine that the damages done by escalating oil prices and the faltering trade growth have maxed out.
The overcast outlook of the industry can be said to loosen a bit amid certain developments, but it keeps one wondering if some of the assumptions behind the central outlook are too pompous and upbeat. To recall, the assumptions behind moderate improvement in the profits of the sector are based on the eurozone situation not getting out of control, US economy not hitting the fiscal cliff and the Chinese economy stabilising its slowdown.
For one, the resolution of the eurozone sovereign debt crisis is not in sight, any time soon. Unemployment in eurozone has actually deteriorated, galloping to 11.14 percent in August 2012, up from 10.2 percent during similar period last year, while it is highest in Spain, hovering around 25 percent of late.
Secondly, the avoidance of the much-dreaded fiscal cliff is a big assumption in itself. The United States has trillion worth of economic events occurring towards the close of the year, from the expiration of Bush tax cut, payroll tax, Alternative Minimum Tax (AMT) pact to pointless tax cuts across the board.
US optimism is at its brink as fears over tax rises and spending cuts have engulfed many businesses and investments. While productivity remains at its ebb, a drag on job creation and hiring decisions is expected to continue. North American airlines, which have been named to show the greatest improvement in profit prospects in the outlook, might just be reined, come December 31, 2012.
Besides, the decelerating recovery in Japan, and slowdown in China and India will also add to the headwinds. There is no denying that the relative softening of the oil prices brought by Saudi Arabia and US, and the efforts of government in Europe and US has lifted some hopes. For the global economic climate, and hence the global aviation sector to spring out and enter a real phase of recovery, better fundamental are required by both the eurozone and the US.
Comments
Comments are closed for this article.