Submit Press release  eTN Team ·  Advertising  ·  eTN Awards  - Worldtourism Events    

Airlines' Losses Forecast Rises

IATA: Airlines' losses may hit $11 Billion in 2009

Sep 16, 2009

Airlines worldwide may lose a combined $11 billion in 2009, $2 billion wider than a previous forecast in June, as fuel costs rise and carriers earn less on fares and cargo, the industry’s main trade group said.

Airline losses will be $3.8 billion next year, with “limited revival of growth in traffic volumes,” the International Air Transport Association said today in Washington. The estimate was the first by the group for 2010.

The forecasts suggest that signs of improvement in many economies may be slow to trickle through to airlines, which are paring jobs and shrinking capacity in response to a drop in first- and business-class travel. The Montreal-based IATA said passenger yields, or average fare per mile, will fall 12 percent this year, compared with the 7 percent drop estimated in June.

“The global economic storm may be abating, but airlines have not yet found safe harbor,” Giovanni Bisignani, IATA’s director general, said in a statement. “The crisis continues.”

Revenue for the year is expected to fall 15 percent from 2008 to $455 billion, the IATA said in a statement.

Oil prices are expected to average $5 a barrel more than in the group’s June forecast, adding $9 billion in costs for the industry, IATA said. The number of premium passengers paying higher-priced business fares will fall 20 percent, according to the IATA.

Bisignani called the revenue drop “shocking” at a news conference, and said such a dramatic drop in yields would be the worst in IATA’s 65-year history.

“We are in intensive care,” he said.

Regional Forecasts

European carriers will post the largest losses in 2009 at $3.8 billion, more than double the previous forecast, IATA said. A world-trade collapse hurt long-haul markets in Europe, and carriers were unable to cut capacity fast enough, the IATA said.

North American carriers will lose $2.6 billion this year, also more than double the earlier forecast, the group said.

In July, Continental Airlines Inc. said it plans to eliminate 1,700 jobs and Southwest Airlines Co. said 1,400 employees took voluntary buyouts, while United Airlines will shrink international capacity by an additional 7 percent.

Delta Air Lines Inc. and the other big U.S. carriers are poised to make more cuts in available seats with the end of the summer travel season, capping the industry’s deepest retrenchment since World War II.

Asia-Pacific carriers will post losses of $3.6 billion, in 2009, similar to the previous forecast, IATA said. Latin American carriers are expected to break even, and Middle East and African carriers will lose $500 million each, according to the group.

Building ‘War Chests’

IATA revised its estimate of world airline losses in 2008 to $16.8 billion from $10.4 billion. The change was due to accounting differences, IATA said.

Revenue isn’t likely to return to 2008 levels until at least 2012. Bisignani said. To sustain themselves for the coming winter, when traffic traditionally falls, airlines have raised $15 billion in cash as “a war chest, to fight the crisis,” he said.

Airlines will see additional “casualties,” or bankruptcies, though Bisignani didn’t predict how many, or which airlines, may fail. Government should ease taxation on airlines and “consolidation is a must” in the industry, he said.

The Bloomberg U.S. Airlines Index, made up of 12 carriers, has declined 16 percent this year, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

Investors may be starting to look past this year to gradual improvement in 2010. The airlines index rose 4.6 percent at 12:40 p.m. New York time, and has gained 9 straight days.

IATA: Airlines' losses may hit $11 Billion in 2009
Image via


Premium Partners