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IATA nearly doubles estimate of airline-industry loss for '09
Recession bites into passenger and cargo traffic, will prompt $9 billion deficit
By Aude Lagorce, MarketWatch
Last Update: 5:35 AM ET Jun 8, 2009
LONDON (MarketWatch) - The world's airlines are set to collectively lose $9 billion this year -- nearly double the previous projection -- as worried consumers cut down on air travel and the economic downturn bites into cargo traffic, an industry body said on Monday.
The International Air Transport Association's previous forecast, issued in March, called for a loss of $4.7 billion. But since then demand has continued to weaken and ticket prices have continued to fall. On the revenue side, the IATA predicted an unprecedented 15% decline to $448 billion. Air cargo demand, meanwhile, is seen slumping 17%.
"There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation our industry has faced," IATA Chief Executive Giovanni Bisignani said in a speech in Kuala Lumpur.
The global economic downturn, however, is taking a bigger toll in some regions than others.
U.S. carriers to suffer less
North American carriers are expected to post a loss of $1 billion, a significant improvement from their $5.1 billion loss last year, mostly because low hedging means they have been able to benefit from lower fuel prices.
European carriers, meanwhile, are seen posting a loss of $1.8 billion, hit by collapsing demand for premium services. In the Asia-Pacific region, airlines will post a loss of $3.3 billion as export-driven traffic from China and India slows.
Not even the Middle East, where traffic continues to grow rapidly, will be able to escape losses. Airlines in the region are expected to lose $1.5 billion, as their hubs see a slump in traffic from recession-hit Western Europe and Japan.
The bleak outlook may not reflect it, but the industry has seen one major positive development in the past year, and that's the decline in oil prices since crude hit a record above $150 a barrel last July.
As a result, IATA forecast that the industry's fuel bill would decline 36% to $106 billion this year. It said fuel would account for roughly 23% of airlines' operating costs at an average price of $56 a barrel this year. In 2008, airlines paid, on average, $99 a barrel.
Airlines were in the red on Monday, along with the broader market. Air France-KLM shares lost 2.7% in Paris. British Airways shares declined 2.3% in London and Deutsche Lufthansa shares slipped 1.5% in Frankfurt.
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