Airlines will make a global profit of $3.5 billion in 2012, according to IATA’s latest prediction.
The figure represents a drop of $1.4 billion on an earlier estimate by the aviation body.
The change to IATA’s industry outlook has been prompted by increasing economic turmoil in Europe.
Tony Tyler, IATA’s CEO, said the biggest risk facing airline profitability over the next year comes from the Eurozone sovereign debt crisis.
Governments failing to resolve the crisis “could lead to losses of over $8 billion – the largest since the 2008 financial crisis”, he said.
IATA has also downgraded its profits prediction for European carriers by in 2011, from $1.4 billion to $1 billion.
This reduction comes despite Europe being one of the fastest growing regions in terms of traffic this year.
In 2012, IATA expects European airlines to fall into losses of $600 million, due to weakness in their home market and increases in passenger taxes.
This compares with a predicted profit of $1.7 billion for North American carriers and $2.1 billion for airlines in the Asia-Pacific region.
“Even our best case scenario for 2012 is for a net margin of just 0.6% on revenues of $618 billion. But the industry is really moving at two speeds with highly taxed European carriers headed into the red,” said Tyler.