IATA has revised its outlook for the global air
transport industry with losses of US$4.7 billion in 2009. This is
significantly worse than IATA’s December forecast for a US$2.5 billion
loss in 2009, reflecting the rapid deterioration of the global economic
Industry revenues are expected to fall by
12% (US$62 billion) to US$467 billion. By comparison, the
previous revenue decline, after the events of 11 September 2001,
saw industry revenues fall by US$23 billion over the period of
2000 to 2002 (approximately 7%).
“The state of
the airline industry today is grim. Demand has deteriorated much
more rapidly with the economic slowdown than could have been
anticipated even a few months ago. Our loss forecast for 2009 is
now US$4.7 billion. Combined with an industry debt of US$170
billion, the pressure on the industry balance sheet is extreme,”
said Giovanni Bisignani, IATA’s Director General and CEO.
Demand is projected to fall sharply with passenger traffic
expected to contract by 5.7% over the year. Revenue implications
of this fall will be exaggerated by an even sharper fall in
premium traffic. Cargo demand is expected to decline by 13%.
Both are significantly worse than the December forecast of a 3%
drop in passenger demand and a 5% fall in cargo demand. Yields
are expected to drop by 4.3%.
Falling fuel prices
are helping to curb even larger losses. With an expected fuel
price of US$50 per barrel (Brent oil), the industry’s fuel bill is
expected to drop to 25% of operating costs (compared to 32% in
2008 when oil averaged US$99 per barrel). Combined with lower
demand, total expenditure on fuel will fall to US$116 billion
(compared to US$168 billion in 2008).
“Fuel is the
only good news. But the relief of lower fuel prices is
overshadowed by falling demand and plummeting revenues. The
industry is in intensive care. Airlines face two immediate
fundamental challenges: conserving cash and carefully matching
capacity to demand,” said Bisignani.
revised its forecast losses for 2008 from US$5 billion to US$8.5
billion. The fourth quarter of 2008 was particularly difficult as
carriers reported large hedging-related losses and a very sharp
fall in premium travel and cargo traffic.
differences remain significant:
Carriers in this region continue to be hardest hit by the current
economic turmoil and are expected to post losses of US$1.7 billion
(significantly worse than the previous loss forecast of US$1.1
billion). Japan, the region’s largest market is expected to see
GDP drop by 5.5% in 2009 with exports already in freefall. China
has been successful in stimulating demand in domestic markets with
pricing adjustments. International demand to and from China is
expected to contract by between 5% and 10% over the year. India,
whose market for international air services tripled in size
between 2000 and 2008, is expected to see capacity increase by
0.7% in 2009, while demand drops between 2% and 3%. Overall, the
region is expected to see a 6.8% fall in demand but only a 4%
drop in capacity.
North America: Carriers in this
region are expected to deliver the best performance for 2009 with
a combined US$100 million profit. A 7.5% fall in demand is
expected to be matched by a 7.5% cut in capacity. Despite the
worsening economic conditions, this is relatively unchanged from
the earlier forecast of a US$300 million profit. Carriers are
benefiting from careful capacity management and lower spot prices
Europe: Europe’s carriers are expected to
lose US$1 billion in 2009. A forecast 2.9% fall in the continent’s
GDP is expected to result in a drop in demand of 6.5%. Capacity
cuts of 5.3% will not keep pace with the fall in demand, driving
yields and profitability down.
Latin America: While
Latin America is forecast to maintain positive GDP growth in 2009,
the collapse in demand for commodity products is expected to see
traffic plunge by 7.8%. Carriers are only expected to be able to
drop capacity by 3.8% resulting in losses of US$600 million.
Africa: African carriers are expected to produce 2009
losses of US$600 million. This is six times the US$100 million
lost in 2008. The continent’s carriers are losing market share on
long-haul routes. Demand is expected to drop by 7.8% with only a
6% fall in capacity.
Middle East: Middle East
will be the only region with demand growth in 2009 (+1.2%). But
this will be overshadowed by the impact of a 3.8% increase in
capacity. While this is significantly below the double-digit
growth of previous years, the region continues to add capacity
ahead of demand. The result is expected to be a loss of US$900
million (a slight deterioration from the US$800 million loss
recorded in 2008).
the deterioration forecast for 2009 had already happened by
January. As manufacturers end their de-stocking there should be a
modest bounce in air freight as component shipping rises a little.
But weak consumer and business confidence is expected to keep
spending and demand for air transport low.
prospects for airlines are dependant on economic recovery. There
is little to indicate an early end to the downturn. It will be a
grim 2009. And while prospects may improve towards the end of the
year, expecting a significant recovery in 2010 would require more
optimism than realism,” said Bisignani.
also cautioned that this crisis must bring change. “Recovery will
not come without change. There is no doubt that this is a
resilient industry capable of catalysing economic growth. But we
are structurally sick. The historical margin of this
hyper-fragmented industry is 0.3%. Bail-outs are not the
prescription to return to health. Access to global capital, the
ability to merge and consolidate and the freedom to access markets
are needed to run this industry as normal profitable business.
This is IATA’s Agenda for Freedom—and a very cost effective
solution for governments desperate to stimulate their economies,”
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