OTTAWA, Canada – Canada’s airlines can expect a second consecutive year of losses in 2012, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Air Transportation Industry – Summer 2012.
“The Canadian air transportation industry is set for a bumpy flight over the coming months. The European debt crisis is not over and the U.S. economic recovery remains sluggish. At home, Canadians are turning their attention to paying down their debt and are growing more cautious when it comes to spending,” said Michael Burt, Director, Industrial Economic Trends.
“Given this weaker confidence and the deceleration in world economic growth, Canadian consumers and businesses are likely to be more cautious about their travel spending in the coming months.”
With fuel prices increasing more than 30 per cent in 2011, the industry lost $900 million last year. Oil prices have cooled off in the first half of this year, so costs will rise at a slower pace than revenues. However, the industry is forecast to lose another $165 million in 2012.
When the industry does return to the black – a profit of $231 million is expected in 2013 – its profit margin will be only 1.2 per cent, well below the margins of recent years. The challenging economic environment, combined with fiercer competition in the industry, is putting pressure on airlines’ profit margins.