IATA Predicts Airline Losses Of $9B
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Adrian Schofield adrian_schofield@aviationweek.com
Jens Flottau jflottau@freenet.de
Kuala Lumpur
The global airline industry is expected to see losses of around $9 billion this year - double the loss predicted less than three months ago - due to a projected revenue decline of $80 billion, according to new estimates from the International Air Transport Association.
IATA Director General Giovanni Bisignani painted a bleak picture of the industry's near-term outlook at the group's annual meeting in Kuala Lumpur today. "Optimists see growth by the end of the year but pessimists view this as a mirage and expect an L-shaped recovery. I am a realist. I don't see facts to support optimism," Bisignani said.
In March, IATA predicted that the 2009 net loss would be $4.7 billion, but the airline environment has worsened since then. As well as the $9 billion in net losses, the industry is expected to see an operating loss of $1.7 billion - which would be its first operating deficit since 2003.
Of the major regions, IATA estimates North American airlines will see a combined loss of $1 billion, compared to its earlier prediction of a slight profit. The loss for Asia Pacific carriers rises from $1.7 billion to $3.3 billion, reflecting the consensus that this region is the worst hit by the downturn. The revised loss for European airlines is $1.8 billion, versus the earlier loss forecast of $1 billion. Other regions also see steeper losses.
The industry loss calculation for 2008 was also revised upward to $10.4 billion, compared to the previous estimate of $8.5 billion. Fifty airlines have ceased operations over the past 18 months, with 16 of these failures occurring this year.
IATA believes the current downturn is much worse than the industry crisis in the aftermath of the Sept. 11, 2001, attacks. "After September 11, 2001, revenues fell by 7%. Almost immediately, we returned to growth that was fuelled by strong economies. This time we face a 15% drop with a global recession. It's a different world," Bisignani said. The future of the industry depends on "drastic resizing and reshaping."
Bisignani recommended that airlines keep a big cash cushion to get through the downturn intact. He also advocated further consolidation as a means to create stronger companies and cited Air France-KLM, Lufthansa/Swiss or Delta/Northwest as examples. Bisignani urged carriers to better match capacity to demand, but pointed out that over the coming three years, a total of 4,000 aircraft are to be delivered representing 17% of industry capacity. "Finding customers to fill them profitably will be a challenge," he predicted.
Due to the unprecedented drop in demand the industry faces, many executives believe there will be permanent structural change. Swiss CEO Christoph Franz and his British Airways counterpart Willie Walsh last week stated that things will never be as good for airlines as they were before the latest slump, and that customers are permanently trading down from first and business class to economy.
