Deeper losses predicted for 2009

GLOBAL airline losses are forecast to increase from the previous estimate of US$9 billion to at least $11 billion this year. The increase is due to rising fuel prices and exceptionally weak yields. Industry revenues for the year are expected to fall by US$80 billion (15 per cent) to $455 billion compared with 2008 levels.

Three main factors are driving the expected losses: demand, yield and oil prices.

Demand for cargo is expected to decline by 14 per cent for 2009 compared to 17 per cent respectively in the June forecast. By July, cargo demand was down 11.3 per cent and passenger demand was down 2.9 per cent. While both are improvements over the -23.2 per cent low for cargo in January the market remain weak.

Yields are expected to fall 15 per cent for cargo, compared to 11 per cent respectively in the June forecast. Cargo utilization remains at less than 50 per cent despite the removal of 227 freighters from the global fleet.

Spot oil prices have been driven up sharply in anticipation of improved economic conditions. Oil is now expected to average $61 per barrel (Brent) for the year, up from $56 per barrel in the June forecast. This will add $9 billion in cost for a total expected fuel bill of $115 billion.

While the figures show at least a little improvement for cargo from June’s predictions, IATA still believes there is not chance for any significant recovery this year.

“The bottom line of this crisis – with combined 2008/9 losses at $27.8 billion – is larger than the impact of 9/11,” said Giovanni Bisignani, IATA’s director general and chief executive officer (above right). Industry losses for 2001-2002 were $24.3 billion. “This is not a short-term shock; $80 billion will disappear from the industry’s top line. That 15 per cent of lost revenue will take years to recover. Conserving cash, careful capacity management and cutting costs are the keys to survival. The global economic storm may be abating, but airlines have not yet found safe harbour. The crisis continues,” said Bisignani.

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