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Airline Industry

Airline industry faces 'year of hell'  Oct 09, 2008

The airline industry is facing a “year of hell” that could be worse than the downturn after the attacks of 9/11, the industry warned.

Mike Ambrose, the director general of the European Regional Airlines (ERA), which represents 79 airlines, said he expected the number of carriers around the world declaring bankruptcy to double to at least 70 this year.

“We are now up to around 35 this year,” Mr Ambrose said. “I see at least that number over the winter.”

Numerous carriers have already been grounded because of a combination of high fuel costs and falling passenger demand. XL, the travel company, was declared bankrupt last month stranding 80,000 passengers and other carriers such as Zoom, Silverjet and Oasis have also been forced to close.

However, the worsening economic environment combined with a normal reduction in passenger numbers over winter is expected to lead to even greater losses in the aviation sector.

Mr Ambrose said that the current climate for airlines was “far more significant, far more far-reaching” than the period after the attacks on New York in 2001, describing the current year as a “year of hell”.

“At 9/11 there was a terrorist attack that created a loss of confidence in safety. This is far more pernicious - it is a loss of confidence in investment,” he said.

“There are a major set of problems - such as governments shoring up banks - that go way outside aviation and take longer to resolve,” he added.

The comments made by Mr Ambrose were echoed by Andy Harrison, the chief executive of easyJet.

“The world is gloomy out there,” Mr Harrison said. He added that the coming year would be very tough for airlines and not all would survive.

The International Air Transport Association, IATA, has estimated that global airline loses will be $5.2 billion this year and $4.9 billion next year due to the economic slowdown and high price of oil. This compares with a combined profit of $5.6 billion last year.

Airline shares have been hit by the negative sentiment towards their prospects in the coming months and British Airways has seen its share price fall by two thirds in the past year from a peak of £4.50 to £1.25 yesterday. easyJet has fallen from a high of £6.86 this year to £3.04 yesterday.

Airline industry faces 'year of hell'

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