IATA Nearly Doubles Airline Loss Forecast To $9 Billion

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IATA Nearly Doubles Airline Loss Forecast To $9 Billion

By Jay Boehmer

JUNE 11, 2009 -- The International Air Transport Association this week nearly doubled its forecast for global airline losses this year to $9 billion from its previous loss outlook of $4.7 billion, issued in March. The organization said the new forecast reflects "a rapidly deteriorating revenue environment."

IATA attributed the mounting losses to the worldwide recession that has hampered carriers' efforts to lift revenue. The association anticipates "an unprecedented" 15 percent decline in revenue this year, or a reduction of $80 billion compared with 2008. IATA noted its 2009 negative revenue outlook more than doubles the 7 percent decline witnessed during the industry's last major downturn, following Sept. 11, 2001.

"There is no modern precedent for today's economic meltdown," said IATA director general and CEO Giovanni Bisignani during the association's annual meeting this week in Kuala Lumpur. "The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced."

IATA said it expects worldwide passenger demand to fall this year by 8 percent, exacerbated by a falloff in airline pricing power which would leave passenger yields to decline by 7 percent this year, compared with last. Declines in the price of oil, capacity restraint demonstrated by many airlines and efficiency gains made in recent years will not be enough to stave off losses this year, IATA noted.

IATA expects passenger carriers in all regions to report losses this year, led by $3.3 billion in losses among Asia/Pacific carriers and followed by European airlines, which IATA expects to lose $1.8 billion. IATA said European carriers face "collapsing demand for premium services in all major markets served by the region's carriers."

IATA said carriers in North America would lose about $1 billion, despite aggressive capacity cuts established last year and continuing into 2009.

Meanwhile, IATA expects Middle Eastern carriers to show "strong traffic growth," but as the region continues to see capacity growth, its losses will mount to $1.5 billion. Latin American airlines are expected to lose $900 million, while African carriers should lose $500 million this year, IATA reported.

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