Airlines predict big loss of 4.7 billion

The International Air Transport Association (IATA) announced a revised outlook for the global air transport industry with losses of US$4.7 billion in 2009. This is significantly worse than IATA December forecast for a US$2.5 billion loss in 2009, reflecting the rapid deterioration of the global economic conditions.

Industry revenues are expected to fall by 12.0% (US$62 billion) to US$467 billion. By comparison, the previous revenue decline, after the events of 11 September 11, 2001, saw industry revenues fall by US$23 billion over the period of 2000 to 2002 (approximately 7.0%).

The state of the airline industry today is grim. Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago. Our loss forecast for 2009 is now US$4.7 billion. Combined with an industry debt of US$170 billion, the pressure on the industry balance sheet is extreme,” said Giovanni Bisignani, IATA? Director General and CEO.

Demand is projected to fall sharply with passenger traffic expected to contract by 5.7% over the year. Revenue implications of this fall will be exaggerated by an even sharper fall in premium traffic.

Cargo demand is expected to decline by 13.0%. Both are significantly worse than the December forecast of a 3.0% drop in passenger demand and a 5.0% fall in cargo demand. Yields are expected to drop by 4.3%.
Falling fuel prices are helping to curb even larger losses. With an expected fuel price of US$50 per barrel (Brent oil), the industry fuel bill is expected to drop to 25% of operating costs (compared to 32% in 2008 when oil averaged US$99 per barrel). Combined with lower demand, total expenditure on fuel will fall to US$116 billion (compared to US$168 billion in 2008).

IATA also revised its forecast losses for 2008 from US$5.0 billion to US$8.5 billion. The fourth quarter of 2008 was particularly difficult as carriers reported large hedging-related losses and a very sharp fall in premium travel and cargo traffic.