World airlines seen losing $9 billion this year
Monday, June 8, 2009
KUALA LUMPUR, Malaysia -- The world's airlines will collectively lose $9 billion this year -- nearly double the previous projections -- and face a slow recovery as the economic crisis saps air travel and cargo demand, an industry body warned Monday.
The International Air Transport Association, which represents 230 airlines worldwide, increased its loss estimate from 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 confidence, high business inventories and rising oil prices pose headwinds for future recovery, the association said during a two-day global aviation conference in Kuala Lumpur.
Revenues are expected to decline by $80 billion -- 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. The Geneva-based association also revised its estimated 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 and some 100,000 jobs worldwide are at risk, it said.
The association 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.
Bisignani urged governments to avoid protectionist policies and reiterated his call for more liberalization such as the lifting of restrictions on routes and cooperation between airlines to bolster the global airline industry.
"It would be a cheap and effective stimulus...liberalizing key routes today would create 24 million jobs and $490 billion in economic activity," he said.
Over the next three years, he said about 4,000 aircraft are scheduled to be delivered. This year alone, airlines are expected to spend about $25 billion to take delivery of more than 800 Western-built jets, draining cash for a second straight year.
"Aircraft ordered in good times are being delivered in recession," Bisignani said. "Finding customers to fill them profitably will be a challenge."
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. airlines.
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.