Forecast worsens for 2009 losses

IATA has revised its airline financial forecast for 2009 to a global loss of US$9 billion. This is nearly double the association’s March estimate of a $4.7 billion loss, reflecting a rapidly deteriorating revenue environment. IATA also revised its loss estimate for 2008 to $10.4 billion from the previous estimate of $8.5 billion.

“There is no modern precedent for today’s economic meltdown,” said Giovanni Bisignani, IATA’s director general and chief executive officer. “After September 11, revenues fell by seven per cent. It took three years to recover lost ground, even on the back of a strong economy. This time we face a 15 per cent drop – a loss of revenues of $80 billion – in the middle of a global recession.”

Recession is the most significant factor impacting the industry’s bottom line. IATA’s revised forecast sees revenues declining an unprecedented 15 per cent ($80 billion) from $528 billion in 2008 to $448 billion in 2009.

Air cargo demand is expected to decline by 17 per cent. In 2009, airlines are forecast to carry 33.3 million tonnes of freight, compared to 40.1 million tonnes in 2008. Passenger demand is expected to contract by eight per cent to 2.06 billion travellers compared to 2.24 billion in 2008. The revenue impact of falling demand will be further exaggerated by large falls in yields – 11 per cent for cargo and seven per cent for passenger.

North American carriers are expected to show a loss of $1 billion. This is significantly better than the $5.1 billion loss in 2008. Limited hedging by US carriers exposed the US industry to rising fuel prices in 2008. This turned into an advantage in 2009 by giving US carriers access to lower spot prices. Early capacity cuts are also helping.

European carriers are expected to post losses of $1.8 billion with collapsing demand for premium services in all major markets served by the region’s carriers (intra-Europe, North Atlantic and Europe to Asia).

Asia-Pacific carriers will post the largest losses at $3.3 billion. Japan, the region’s largest market, is in deep recession. The growth markets of China and India are delivering major losses as export-driven demand slows. This is a slightly better performance than the $3.9 billion that the region’s carriers lost in 2008.

Middle East carriers, despite strong traffic growth, will see losses deepen to US$1.5 billion. The region’s intercontinental hubs are vulnerable to recessionary impacts in both European and Asian source markets.
Latin American carriers are expected to post a loss of $900 million, as the impact of the recession in the US and China weakens demand for the region’s commodities.

African carriers are expected to see losses of $500 million. This is the result of a loss of market share combined with the impact of the recession.

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