IATA forecasts deeper losses for airlines

Airlines this year would lose $11 billion due to rising fuel prices and exceptionally weak yields, the International Air Transport Association has said.

This is $2 billion worse than the previously projected $9 billion.

According to IATA's revised global financial forecast on airline losses, industry revenues for the year are expected to fall by $80 billion (15 per cent) to $455 billion compared with 2008 levels.

"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," said Giovanni Bisignani, IATA's Director General and CEO.

Bisignani said, "The bottom line of this crisis -- with combined 2008-9 losses at $27.8 billion -- is larger than the impact of 9/11."

Stressing that conserving cash, careful capacity management and cutting costs are the keys to survival, Bisignani said the global economic storm may be abating, but "airlines have not yet found safe harbor. The crisis continues".

IATA also revised its loss estimates for 2008 from a loss of $10.4 billion to a loss of $16.8 billion, an IATA statement said.

This revision reflects restatements and clarification of the accounting treatment of very large revaluations to goodwill and fuel hedges.

IATA said passenger traffic is expected to decline by 4 per cent and cargo by 14 per cent for 2009, compared to declines of 8 and 17 per cent, respectively in the June forecast.

By July, cargo demand was -11.3 per cent and passenger demand -2.9 per cent. While both are improvements over the lows of -23.2 per cent for cargo (January) and -11.1 per cent for passenger (March), both markets remain weak.

On the other hand, yields are expected to fall 12 per cent for passenger and 15 per cent for cargo, compared to declines of 7 per cent and 11 per cent, respectively in the June forecast.

The fall in passenger yield is led by the 20 per cent drop in demand for premium travel. Cargo utilization remains at less than 50 per cent despite the removal of 227 freighters from the global fleet.

There is little hope for an early recovery in yields in either the passenger or cargo markets, IATA said.