US$2.5 billion loss
Environment in 50 Years-
Geneva - The International Air Transport Association
(IATA) announced its forecast for 2009 showing an industry loss of US$2.5 billion.
All regions, except the US, are expected to report larger losses in 2009 than
Forecast highlights are:
- Industry revenues are expected
to decline to US$501 billion. This is a fall of US$35 billion from the
US$536 billion in revenues forecasted for 2008. This drop in revenues is
the first since the two consecutive years of decline in 2001 and 2002.
- Yields will decline
by 3.0% (5.3% when adjusted for exchange rates and inflation).
- Passenger traffic is expected to
decline by 3% following growth of 2% in 2008. This is the first decline
in passenger traffic since the 2.7% drop in 2001.
- Cargo traffic is expected to
decline by 5%, following a drop of 1.5% in 2008. Prior to 2008 the last
time that cargo declined was in 2001 when a 6% drop was recorded.
- The 2009 oil
price is expected to average US$60 per barrel (Brent)
for a total bill of US$142 billion. This is US$32 billion lower than in
2008 when oil averaged US$100 per barrel (Brent).
“The outlook is bleak. The
chronic industry crisis will continue into 2009 with US$2.5 billion in
losses. We face the worst revenue environment in 50 years,” said Giovanni
Bisignani, IATA’s Director General and CEO.
IATA also updated its forecast for 2008 to a loss of US$5.0 billion. This is
slightly improved from the US$5.2 billion loss projected in the Association’s
September forecast primarily as a result of the rapid decline in fuel prices.
The reduction in industry losses from 2008 to 2009 is primarily due to a
shift in the results of North American carriers.
Carriers in this region were hardest hit by high fuel prices with very
limited hedging and are expected to post the largest industry losses for 2008
at US$3.9 billion. An early 10% domestic capacity reduction in response to
the fuel crisis has given the region’s carriers a head-start in combating the
recession-led fall in demand. The lack of hedging is now allowing the
region’s carriers to take full advantage of rapidly declining spot fuel
prices. As a result, North American carriers are expected to post a small
profit of US$300 million in 2009. “North America will be the only region in
the black, but the expected US$300 million profit is less than 1% of their
revenue. 2009 will be another tough year for everyone,” said Bisignani.
All other regions will show losses:
- Asia-Pacific carriers will see
losses more than double from the US$500 million in 2008 to US$1.1
billion in 2009. With 45% of the global cargo market, the region’s
carriers will be disproportionately impacted by the expected 5% drop in
global cargo markets next year. The region’s largest market - Japan - is
already in recession. And its two main growth markets - China and India
- are expected to deliver a major shift in performance. Chinese growth
will slow as a result of the drop-off in exports. India’s carriers,
which are already struggling with high taxes and insufficient
infrastructure, can expect a drop in demand following on from the tragic
terror incidents in November.
- Losses for European
carriers will increase ten-fold to US$1 billion.
Europe’s main economies are already in recession. Hedging has locked in
high fuel prices for many of the region’s carriers in US dollar terms,
and the weakened Euro is exaggerating the impact.
- Middle Eastern airlines will see losses
double to US$200 million. The challenge for the region will be to match
capacity to demand as fleets expand and traffic slows - particularly for
- Latin American carriers will see
losses double to US$200 million. Strong commodity demand that has driven
the region’s growth has been severely curtailed in the current economic
crisis. The downturn in the US economy is hitting the region hard.
- African airlines will see
losses of US$300 million continue. The region’s carriers face strong competition.
Defending market-share will be the main challenge.
Bisignani made special note of
the continuing contraction of air cargo traffic that started in June 2008.
“Air cargo comprises 35% of value of goods traded internationally. The 7.9%
decline in October is a clear indication that the worst is yet to come - for
airlines and the slowing global economy,” said Bisignani.
“Airlines have done a remarkable job of restructuring themselves since 2001.
Non-fuel unit costs are down 13%. Fuel efficiency has improved by 19%. And
sales and marketing unit costs have come down by 13%. IATA made a significant
contribution to this restructuring. In 2008 our fuel campaign helped airlines
to save US$5 billion, equal to 14.8 million tonnes of CO2. And our work with monopoly
suppliers yielded saving of US$2.8 billion. But the ferocity of the economic
crisis has overshadowed these gains and airlines are struggling to match
capacity with the expected 3% drop in passenger demand for 2009. The industry
remains sick. And it will take changes beyond the control of airlines to
navigate back into profitable territory,” said Bisignani.
Bisignani outlined an industry action plan for 2009 that reflected the
Association’s Istanbul Declaration in June of this year. “Labour must understand
that jobs will disappear when costs don’t come down. Industry partners must
contribute to efficiency gains. And governments must stop crazy taxation, fix
the infrastructure, give airlines normal commercial freedoms and effectively
regulate monopoly suppliers,” said Bisignani.
Giovanni Bisignani's full speech
Financial Forecast (pdf)
- IATA -
- IATA (International Air Transport Association)
represents some 230 airlines comprising 93% of scheduled international