Aviation industry to lose US$2.5bn, says IATA

The International Air Transport Association (IATA)
predicts the aviation industry could lose US$2.5bn next year, the worst revenue environment in 50 years, with all region, except the US, to report larger losses in 2009 than in 2008.
Industry revenues are expected to decline to US$501 billion. This is a fall of US$35bn from the US$536bn in revenues forecaste for 2008. This drop in revenues is the first since the two consecutive years of decline in 2001 and 2002.

“The outlook is bleak. The chronic industry crisis will continue into 2009 with US$2.5 billion in losses. We face the worst revenue environment in 50 years,” said Giovanni Bisignani, IATA’s Director General and CEO.

Passenger traffic is expected to decline by 3% following growth of 2% in 2008. This is the first decline in passenger traffic since the 2.7% drop in 2001.

Cargo traffic is expected to decline by 5%, following a drop of 1.5% in 2008. Prior to 2008 the last time that cargo declined was in 2001 when a 6% drop was recorded.
The 2009 oil price is expected to average US$60 per barrel for a total bill of US$142bn. This is US$32bn lower than in 2008 when oil averaged US$100 per barrel.

IATA also updated its forecast for 2008 to a loss of US$5.0bn. This is slightly improved from the US$5.2bn loss projected in the Association’s September forecast primarily as a result of the rapid decline in fuel prices.


The reduction in industry losses from 2008 to 2009 is primarily due to a shift in the results of North American carriers. Carriers in this region were hardest hit by high fuel prices with very limited hedging and are expected to post the largest industry losses for 2008 at US$3.9 billion.

“North America will be the only region in the black, but the expected US$300 million profit is less than 1% of their revenue. 2009 will be another tough year for everyone,” said Bisignani.

Asia-Pacific carriers will see losses more than double from the US$500m in 2008 to US$1.1bn in 2009. The region’s largest market - Japan - is already in recession. And its two main growth markets - China and India - are expected to deliver a major shift in performance.

Losses for European carriers will increase ten-fold to US$1 billion. Europe’s main economies are already in recession. Hedging has locked in high fuel prices for many of the region’s carriers in US dollar terms, and the weakened Euro is exaggerating the impact.

Middle Eastern airlines will see losses double to US$200 million. The challenge for the region will be to match capacity to demand as fleets expand and traffic slows - particularly for long-haul connections.

Latin American carriers will see losses double to US$200 million. Strong commodity demand that has driven the region’s growth has been severely curtailed in the current economic crisis. The downturn in the US economy is hitting the region hard.

“The industry remains sick. And it will take changes beyond the control of airlines to navigate back into profitable territory,” he added. “Labour must understand that jobs will disappear when costs don’t come down. Industry partners must contribute to efficiency gains. And governments must stop crazy taxation, fix the infrastructure, give airlines normal commercial freedoms and effectively regulate monopoly suppliers.”