The Independent
By Danny Fortson, Business Correspondent
Thursday, 19 June 2008
The airline industry will be hit by a downturn far worse than even the most tumultuous periods in recent memory – the post- 9/11 years and the early Nineties recession – new research predicts.
Morgan Stanley slashed its earnings forecasts yesterday for several major European carriers, including British Airways and easyJet, in the latest of a flurry of gloomy assessments of the industry. Penelope Butcher, the analyst who authored the report, warned that although the record oil price has already led to two dozen bankruptcies worldwide in the first half of this year, the worst is yet to come.
"The unprecedented move in crude and jet fuel prices over the last 12 months means that fundamental valuation methods are no longer valid for the airline sector," she said. "Industry returns are likely to be the lowest we have seen in recent history (including the last global recession and even September 11) and carriers could well break previous lows on [valuation] multiples". Several carriers will be plunged into loss, she added.
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