Airlines group predicts big industry losses

[March 24, 2009]  GENEVA (AP) -- World airlines will lose $4.7 billion this year due to the economic crisis, while revenues will drop by more than after the Sept. 11, 2001 terrorist attacks in the U.S., a major industry association predicted Tuesday.

The revised loss estimate, nearly double the previous forecast issued in December, reflects "the rapid deterioration of the global economic conditions," said the International Air Transport Association.

"The state of the airline industry today is grim," said IATA CEO Giovanni Bisignani. "Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago."

Revenues are expected to fall by $62 billion, or 12 percent, to $467 billion, the association said.

"Resizing the industry will be much tougher than the adjustments we saw after 9/11 or SARS," Bisignani said.

The 2001 attacks in the United States had a major impact on air travel. Industry revenues fell about 7 percent, or $23 billion, from 2000 to 2002. The 2003 outbreak of Severe Acute Respiratory Syndrome in Asia also led to a major decline in air travel, especially in the region.

"The pressure on the industry balance sheet is extreme," said Bisignani.

Running counter to the trend in the outlook is North America, where carriers are expected to deliver the best performance with a combined $100 million profit for the year, the association said.

"A 7.5 percent fall in demand is expected to be matched by a 7.5 percent cut in capacity," IATA said. "Despite the worsening economic conditions, this is relatively unchanged from the earlier forecast of a $300 million profit. Carriers are benefiting from careful capacity management and lower spot prices for fuel."

The group, which represents 230 airlines worldwide, said passenger traffic is expected to drop by 5.7 percent over the year. Cargo demand will decline by 13 percent.

"Both are significantly worse than the December forecast of a 3.0 percent drop in passenger demand and a 5.0 percent fall in cargo demand," it said.

Bisignani said losses would have been even larger without the fall in fuel prices in recent months.

IATA also revised upward to $8.5 billion its forecast losses for last year. The previous estimate was $5 billion.

"The fourth quarter of 2008 was particularly difficult," with carriers reporting a very sharp fall in premium travel and cargo traffic, it said.

The Asia Pacific region is the hardest hit. It is expected to post losses of $1.7 billion, compared with the previous forecast loss of $1.1 billion.

Europe's carriers are expected to lose $1 billion in 2009, and Latin America is expected to see traffic plunge by 7.8 percent.

African airlines are expected to lose $600 million, compared with 2008 losses of $100 million.

The Middle East will continue to see a 1.2 percent growth in demand, well off the double-digit increases of recent years, but the growth will be overshadowed by a 3.8 percent increase in capacity.

"The result is expected to be a loss of $900 million -- a slight deterioration from the $800 million loss recorded in 2008," IATA said.

[Associated Press; By FRANK JORDANS]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.