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Business & Technology

World airlines seen losing $9 billion this year

June 7th, 2009 12:00 am by Associated Press






KUALA LUMPUR, Malaysia — The world’s airlines will collectively lose $9 billion in 2009 with revenues to shrink by $80 billion from a year ago, as the economic crisis saps air travel and cargo demand, a key industry body warned Monday.


The International Air Transport Association said the revised loss estimate was nearly double the $4.7 billion it forecast in March, reflecting a “rapidly deteriorating revenue environment.”


Although there has been growing signs of a bottoming out of the recession, IATA said the industry was severely hit in the first quarter with 50 major airlines reporting losses of more than $3 billion. Weak consumer confident, high business inventories and rising oil prices pose headwinds for future recovery, it said.


Revenues are expected to decline by an unprecedented 15 percent from a year ago to $448 billion this year, and the weakness will persist into 2010, it said.


“There is no modern precedent for today’s economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced,” said IATA Chief Executive Giovanni Bisignani.


IATA, which represents 230 airlines worldwide, also raised its forecast loss for last year to $10.4 billion, from $8.5 billion previously.


It said passenger traffic for 2009 is expected to contract by 8 percent from a year ago to 2.06 billion travelers. Cargo demand will decline by 17 percent.


IATA expects the industry fuel bill to shrink by $59 billion, or 36 percent, to $106 billion this year, accounting for 23 percent of operating costs with an average oil price of $56 a barrel. But crude oil prices have rallied in recent weeks, breaching the $70 a barrel level on Friday on hopes of economic recovery.


IATA said carriers in all regions were expected to report losses, with Asia-Pacific to be the hardest hit amid a sharp slowdown in its three key markets — Japan, China and India. The region’s carriers are expected to post losses of $3.3 billion, worse than the previous forecast of $1.7 billion but better than the $3.9 billion losses last year.


North American carriers are expected to lose $1 billion, far better than its $5.1 billion losses in 2008, thanks to early capacity cuts and limited hedging by U.S. carriers.


Despite strong traffic, Middle East carriers will see losses deepen to $1.5 billion as the region’s intercontinental hubs are vulnerable to recessionary impacts in Europe and Asia.


A collapse for demand in premium services in all major markets will see European airlines lose $1.8 billion. Latin American carriers are expected to lose $900 million and African airlines $500 million.


Bisignani urged governments to avoid protectionist policies and reiterated his call for more liberalization to bolster the global airline industry.


“Protectionism is the enemy of global prosperity ... we cannot manage in these unprecedented times with one hand tied behind our back. Airlines need the same commercial freedoms that every other industry takes for granted — access to global markets and capital,” he said.


IATA also called for a major reshaping of the air transport value chain to simplify business and cut costs to help airlines survive the global crisis.


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