Wednesday, March 25, 2009

'Sick' aviation industry on a flight path to $4.7bn losses, warns IATA

The aviation industry is "structurally sick" and heading for a $4.7bn (£3.2bn) net loss this year, the director general of the International Air Transport Association has warned.

Giovanni Bisignani said that, in the space of just three months, IATA had revised down December's forecast of $2.5bn losses to reflect "the rapid deterioration of global economic conditions".

Industry revenues are now expected to fall by 12pc, or $62bn, to $467bn in 2009 – far worse than the decline seen after the 2001 terrorist attacks when revenues fell $23bn to $306bn, a 7pc decline.

"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," Mr Bisignani said. "Our loss forecast for 2009 is now $4.7bn. Combined with an industry debt of $170bn, the pressure on the industry balance sheet is extreme."

IATA reckons passenger traffic will fall 5.7pc, with a steeper drop in premium cabins. Cargo traffic is expected to fall by 13pc.

"Fuel is the only good news. But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues," Mr Bisignani said. IATA has also revised down its estimates of losses for 2008, when high fuel prices took their toll, from $5bn to $8.5bn.

IATA expects Asia Pacific carriers to lose $1.7bn in 2009 and European airlines, $1bn, though North American operators could make a $100m profit.

Mr Bisignani said the industry was in dire need of regulatory change to give airlines the "ability to merge and consolidate", adding: "We are structurally sick. The historical margin of this hyper-fragmented industry is 0.3pc."

The industry has lost money every year since 2001, except for a $12.9bn net profit in 2007.

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