Losses doubled as revenues suffer
The global airline industry could suffer a $9bn loss this year, the International Air Travel Association (IATA) said today (June 8).
The revised figure is almost double IATA's previous March forecast of $4.7bn as revenues deteriorate faster than first thought (see ABTN news March 24).
Giovanni Bisignani, IATA's director general and ceo, 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."
Carriers in the Asia-Pacific region are expected to suffer the worst losses, at $3.3bn. IATA said Japan, the region's largest market, was in the midst of a "deep" recession. The growth markets of China and India are being hit by a slow-down in export demand.
European carriers will report the second highest losses at $1.8bn, IATA said. Falling demand for premium travel has hit many of the region's larger network, full-service carriers. British Airways and Iberia have all reported or predicted losses on the back of falling demand for first and business class seats.
BA's ceo Willie Walsh, speaking at IATA's Kuala Lumpur AGM, said there was nothing airlines could to stimulate traffic "particularly in the premium market." He said the market would not "respond to pricing activity," Bloomberg reported.
Mr Bisignani said airlines worldwide face a 15% drop in revenues equivalent to $80bn, at a time when the world is suffering from recession. According to IATA, airline revenues will decline to an "unprecedented" $448bn this year from $528bn in 2008.
IATA also raised its estimated loss for 2008 to $10.4bn from $8.5bn. The latest estimate for the 12 months is twice the original $5bn estimate, the result of substantial fuel hedging losses (see ABTN news March 4).
Passenger demand is also expected to decline 8% to 2.06 billion travellers compared to 2.24 billion in 2008. IATA said this would be further impacted by a 7% fall in passenger yields.
Oil prices this year are almost half that of 2008, IATA said. The industry's fuel bill for the year is forecast to fall by $59bn to $106bn as a result, compared to $165bn in 2008.
But Mr Bisignani said "greedy speculation" had started to drive oil prices back up, with markets picking up on signs of an industry recovery.
He said: "The risk that we have seen in recent weeks is that even the slightest glimmer of economic hope sends oil prices higher. Greedy speculation must not hold the global economy hostage. Failure to act by governments would be irresponsible."
Mr Bisignani also called on governments to grant airlines greater commercial freedom through tax reforms and by resisting "protectionist policies".
"Our future depends on a drastic reshaping by partners, governments and industry. We cannot bear the cost of government micro-regulation, crazy taxation and partners abusing their monopoly power," he said.
www.iata.org