IATA predicts deeper losses this year

IATA    AVIATION FORECAST      

Global - The International Air Transport Association (IATA) has revised its global financial forecast for airlines, now predicting losses amounting to US$11 billion this year.

This new prediction is US$2 billion more than earlier prediction due to rising fuel prices and exceptionally weak yields, with revenue throughout the sector is expected to decline from US$80 billion (15%) to US$455 billion when compared with 2008, IATA said.

According to IATA, passenger traffic is expected to decline by 4% and cargo by 14% this year, while yields are expected to fall 12% for passenger and 15% for cargo. Cargo utilisation remains below 50% despite the removal of 227 freighters from the global fleet.

As oil prices have been driven up to anticipate improved economic conditions, oil is now expected to average US$61 per barrel (Brent) this year, which will add US$9 billion in cost for a total expected fuel bill of US$115 billion.

"This is not a short-term shock. US$80 billion will disappear from the industry's top line. That 15% 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 Giovanni Bisignani, director general and CEO of IATA.

Asia-Pacific carriers are expected to post losses amounting to US$3.6 billion this year.

Although the region is worst hit by the recession, Asian carriers are the first to benefit from reviving economic growth in Asia, said IATA.

"The optimism in the global economy has seen passenger and freight volumes rise, but that is the only bright spot. Rising costs and falling yields have squeezed airline cash flows. The sharp decline in yields will leave a lasting mark on the industry's structure. And revenues are not likely to return to 2008 levels until 2012 at the earliest," said Bisignani.

IATA expects losses to continue into 2010 with the industry expected to report a US$3.8 billion net loss. This is based on a limited revival of growth in traffic volumes of 3.2% for passenger and 5% for cargo coupled with minimal increase in yields of 1.1% for passenger and 0.9% for cargo and oil at US$72 per barrel.

Bisignani said governments need to wake-up and create a policy framework that supports a competitive air transport sector.

"We don't want bailouts. But we need governments to look more seriously at this sector by [firstly] investing in efficient infrastructure, [secondly] replacing the proliferation of environmental taxes with a global solution for the environment and [thirdly] giving airlines normal commercial freedoms to merge where it makes sense and to access markets and global capital like any other business," said Bisignani. 

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