The International Air Transport Association today nearly doubled forecasted losses for global airlines this year to $4.7 billion, from its previously projected $2.5 billion, "reflecting the rapid deterioration of the global economic conditions."
IATA said the airline demand environment has deteriorated significantly since its previous forecast, released in December. IATA now estimates passenger traffic to fall by nearly 6 percent this year, though a disproportionate pullback in premium demand will help to contract revenues by 12 percent, IATA noted. IATA said the anticipated decline is significantly worse than the 7 percent revenue falloff that followed 9/11.
"The state of the airline industry today is grim," said IATA director general and CEO Giovanni Bisignani. "Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago."
IATA said one shred of good news comes in the form of fuel price reductions that "are helping to curb even larger losses." IATA assumes an average fuel price of $50 per barrel this year, unchanged from previous forecasts.
"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.
IATA earlier this month estimated higher-than-expected losses for 2008, with fourth-quarter losses comprising half of the full-year total
(BTNonline, March 2). IATA today added $500 million to its estimate and now is targeting full-year 2008 losses to total $8.5 billion.
IATA said carriers in the Asia/Pacific region "continue to be hardest hit by the current economic turmoil," while U.S.-based carriers are "expected to deliver the best performance for 2009." IATA expects carriers in the United States to finish the year in the black, thanks to "careful capacity management and lower spot prices for fuel." North America is the only region anticipated to post a profit this year, IATA noted.
"The prospects for airlines are dependent on economic recovery," Bisignani said. "There is little to indicate an early end to the downturn. It will be a grim 2009. And while prospects may improve toward the end of the year, expecting a significant recovery in 2010 would require more optimism than realism."