ASIA Travel

IATA Revises Forecasts; Deeper Losses Expected

Search ASIA Travel Tips .com Send to Friend ASIA Travel Latest Travel News Wednesday, 16 September 2009

IATA has revised its global financial forecast predicting airline losses totaling US$11 billion in 2009. This is US$2 billion worse than the previously projected US$9 billion loss due to rising fuel prices and exceptionally weak yields. Industry revenues for the year are expected to fall by US$80 billion (15%) to US$455 billion compared with 2008 levels.

IATA also revised its loss estimates for 2008 from a loss of US$10.4 billion to a loss of US$16.8 billion. This revision reflects restatements and clarification of the accounting treatment of very large revaluations to goodwill and fuel hedges. IATA industry profit figures strip-out such extra-ordinary items which are not realized in cash terms.

“The bottom line of this crisis - with combined 2008-9 losses at US$27.8 billion - is larger than the impact of 9/11,” said Giovanni Bisignani, IATA’s Director General and CEO. Industry losses for 2001-2002 were US$24.3 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 harbor. The crisis continues,” said Bisignani.

Three main factors are driving the expected losses:

Demand: Passenger traffic is expected to decline by 4% and cargo by 14% for 2009 (compared to declines of 8% and 17% respectively in the June forecast). By July, cargo demand was -11.3% and passenger demand was -2.9%. While both are improvements over the lows of -23.2% for cargo (January) and -11.1% for passenger (March), both markets remain weak.

Yield: Yields are expected to fall 12% for passenger and 15% for cargo, compared to declines of 7% and 11% respectively in the June forecast. The fall in passenger yield is led by the 20% drop in demand for premium travel. Cargo utilization remains at less than 50% 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.

Fuel: Spot oil prices have been driven up sharply in anticipation of improved economic conditions. Oil is now expected to average US$61 per barrel (Brent) for the year (up from US$56 per barrel in the June forecast). This will add US$9 billion in cost for a total expected fuel bill of US$115 billion.

“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.

“With cash flows substantially down over the first half of the year, the situation is critical. Larger carriers have built-up cash reserves of US$15 billion - a war chest that is warding off a major cash crisis. But the outlook for small and medium sized carriers - with limited options to raise cash - is much more severe,” Bisignani added.

The regional picture is varied:

North American carriers are expected to post losses of US$2.6 billion, more than double the previously forecast loss of US$1.0 billion. Early resizing of capacity matched the slump in demand. But yields remain weak and recovery in travel demand is being held back by high levels of debt and unemployment.

European carriers are expected to post the largest losses, US$3.8 billion. This is also more than double the previously forecast US$1.8 billion loss. Key long-haul markets were hit by the world trade collapse and delays in relaxing slot regulations prevented a timely reduction in capacity.

Asia Pacific carriers are likely to post losses of US$3.6 billion, similar to the US$3.3 billion previously forecast. Worst hit by the recession and fuel hedging losses at the end of 2008, the region’s carriers are the first to benefit from reviving Asian economic growth and the modest restocking of inventories in the West.

Latin American carriers are expected to break even, an improvement from the previously forecast loss of US$0.9 billion and the best performance among the regions. Airlines in this region are benefiting from more robust economies and less of the consumer debt headwind seen in North America.

Middle East carriers will also see an improved outlook, from a loss of US$1.5 billion to a loss of US$0.5 billion. Airlines continue to gain long-haul market share with expanded capacity and hub connectivity. The weakness of economic recovery, however, could mean continued excess capacity and further losses.

The outlook for Africa’s carriers is unchanged with an expected loss of US$0.5 billion. In spite of many economies on the continent continuing to grow during the global recession, African airlines were not able to benefit and lost market share. Further losses are expected in this region next year.

“This is not an airline-only crisis. There is less cash coming into the industry and the entire value chain must be prepared for change. All our business partners - including airports, air navigation service providers, global distribution systems - must be prepared to cut costs and improve efficiencies. Some airports have delivered cost reductions, but not in line with the magnitude of the changes to the industry cash flow,” said Bisignani.

“Governments need a wake-up call to create a policy framework that supports a competitive air transport sector capable of driving economic expansion. But European governments are fixated on using environment as an excuse to squeeze more taxes out of the industry. And the US is not moving fast enough to deliver the critical advantages to competitiveness that NextGen air traffic management will bring,” said Bisignani. “We don’t want bailouts. But we need governments to look more seriously at this sector by (1) investing in efficient infrastructure, (2) replacing the proliferation of environmental taxes with a global solution for the environment and (3) giving airlines normal commercial freedoms to merge where it makes sense and to access markets and global capital like any other business,” Bisignani said.

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; very little increase in yields of 1.1% for passenger and 0.9% for cargo and oil at US$72 per barrel.

See other recent news regarding: Airlines, Airports, Flights, Codeshare, Lounges, First Class, Business Class, GDS, Rewards, Miles, Hotels, Apartments, Promotions, Spas, New Hotels, Traffic, Visitor Arrivals, Cruises, Free Deals, IATA, Forecasts

Subscribe to our Latest Travel News Daily Email Free of Charge by simply entering your email address to the right. You can also stay updated with our RSS Feed Free Travel News RSS Feed and even add the travel news to your website. Have questions? Please read our travel news FAQ.
Exclusive HD video interview with Mr. Fumihiro Sakakibara, General Manager - Japan, Macao Government Tourism Office. Aviation industry update from the Group CEO of AirAsia, Mr. Tony Fernandes, and Gary Chapman, Emirates' President Group Services and dnata. Exclusive HD video interview with Mr. John R. Rolfs, General Manager of The Ritz-Carlton, Tokyo and Vice President Japan & Korea. In this interview, filmed in a luxurious suite at The Ritz-Carlton, Tokyo on Sunday, 24 September 2017, we ask Mr. Rolfs to tell us more about the property.
Macao Tourism Update Aviation: AirAsia and Emirates The Ritz-Carlton, Tokyo
What exactly is going to happen to The Dusit Thani Bangkok hotel, when will it close, what about the staff, when will the new Dusit Thani Bangkok open and what will it be like? In this exclusive HD video interview with Ms. Sukanya Janchoo, General Manager of The Dusit Thani Bangkok, Steven Howard of asks Khun Sukanya about the hotel, its markets, RevPAR and these major changes. Travelodge Hotels Asia’s Brands and Expansion Plans - Exclusive HD Video Interview with Stephen Burt, Chairman. Exclusive HD video interview with Alejandro Bernabe, Group Director of Avani Hotels and Resorts. We talk about Avani Hotels' future plans and what exciting new developments are in the pipeline. You will also learn that Avani is about to announce a new sub brand, is currently building its first resort with private pool villas and what the group's position is on new technology.
Dusit Thani Bangkok Travelodge Hotels Asia Avani Hotels & Resorts
Jonathan Wigley, CEO of Travelodge Thailand, outlines expansion plans in HD Video Interview. Exclusive HD video interview with Myanmar's Minister of Tourism and Hotels, H.E. U Ohn Maung, about the status of tourism in the beautiful and mystical country of Myanmar (formerly known as Burma). Birth of a Luxury Thai Hotel Brand - HD Video Interview with Christopher E. Stafford, Chief Operating Officer of the newly formed 137 Pillars Hotels & Resorts.
CEO of Travelodge Thailand Myanmar Tourism Update Birth of Luxury Thai Hotel Brand
This HD video tour of Thai AirAsia X's brand new 337-seat Airbus A330-300 aircraft was filmed at Don Mueang Airport in Bangkok, Thailand on 14 May 2014  Exclusive HD video interview with Jaime J. Bautista, President & Chief Operating Officer (COO) of Philippine Airlines (PAL) HD video of the interior and exterior of a Thai Vietjet Airbus A320-200.
Thai AirAsia X A330-300 PAL President & COO Thai Vietjet A320-200
Inside Qatar Airways Boeing 787-8 Dreamliner - HD Video It takes 800 workers between 65 and 80 days to assemble, install, test, paint, furnish and deliver an Emirates Airbus A380. Showers, Bars, Lounge - The Emirates Airbus A380 Has Them All - HD Video Tour Thai Airways International Takes Delivery of Brand New Boeing 777-300ER
Qatar Airways B787 Emirates A380 Thai Airways B777-300ER
Latest Travel News
Copyright © 1997-2017