IATA: Airlines to lose $4.7-B in 2009 due to crisis
abs-cbnNEWS.com | 03/28/2009 12:08 PM
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The International Air Transport Association (IATA) announced a grimmer outlook for the global air transport industry, projecting $4.7 billion in losses for 2009.
In a report, IATA said the amount is significantly worse than its December forecast of $2.5 billion in losses, reflecting the rapid deterioration of global economic conditions.
IATA said industry revenues are expected to fall by 12 percent ($62 billion) to $467 billion this year. The previous revenue decline, which followed the events of Sept. 11, 2001, saw industry revenues fall by $23 billion over the period of 2000 to 2002 (approximately 7 percent), the group said.
“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 $4.7 billion. Combined with an industry debt of $170 billion, the pressure on the industry balance sheet is extreme,” said Giovanni Bisignani, IATA’s Director General and CEO.
Demand is projected to fall sharply with passenger traffic seen to contract by 5.7 percent over the year, compounded by an even sharper fall in premium traffic. Cargo demand is also expected to decline by 13 percent.
Both are significantly worse than the December forecast of a 3-percent drop in passenger demand and a 5-percent fall in cargo demand. Yields, on the other hand, are expected to drop by 4.3 percent.
On a somewhat positive note, IATA said falling fuel prices are helping to curb losses. With an expected fuel price of $50 per barrel (Brent oil), the industry's fuel bill is expected to drop to 25 percent of operating costs, compared to 32 percent in 2008 when oil averaged $99 per barrel.
Combined with lower demand, IATA expects total expenditure on fuel to fall to $116 billion this year from $168 billion in 2008.
“Fuel is the only good news. But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care. Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand,” Bisignani said.
Regional differences
Carriers in the Asia Pacific region are expected to be hardest hit by the current economic turmoil and are expected to post $1.7 billion in losses. Overall, the region is expected to see a 6.8-percent fall in demand but only a 4-percent drop in capacity.
European airlines are projected to lose $1 billion this year, with a 6.5-percent drop in demand due to the expected 2.9-percent fall in the continent's gross domestic product (GDP). IATA said capacity cuts of 5.3 percent will not keep pace with the fall in demand, driving yields and profitability down.
African carriers are seen to produce $600 million in losses for 2009, which is six times its $100-million loss last year. Demand, on the other hand, is expected to drop by 7.8 percent with only a 6-percent fall in capacity.
While Latin America is forecast to maintain a positive GDP growth this year, the collapse in demand for commodity products is expected to see traffic plunge by 7.8 percent. Carriers are only expected to be able to drop capacity by 3.8 percent, resulting in losses of $600 million.
In North America, airlines are seen to deliver the best performance for 2009 with a combined $100-million profit. A 7.5-percent fall in demand is expected to be equally matched with a cut in capacity.
The Middle East is the only region with a projected demand growth this year of 1.2 percent. However, IATA said this will be overshadowed by the impact of a 3.8-percent increase in capacity.
While this is significantly below the double-digit growth of previous years, IATA said the region continues to add capacity ahead of demand. The result is expected to be a loss of $900 million in 2009, a slight deterioration from the $800-million loss recorded last year.
