Airlines set to lose another $5.6bn next year

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The Independent Online

The struggling global airline industry faces another $5.6bn (£3.5bn) of losses next year, on top of the $11bn recorded in 2009, the International Air Transport Association (Iata) said yesterday.

The latest predictions confirm a gloomy outlook for the battered sector as rising fuel costs and slashed fares drag carriers into the red despite improving passenger numbers.

Giovanni Bisignani, the director general of Iata, said 2009 brings to a close a challenging decade in which the aviation sector lost $49bn. "The worst is likely behind us," Mr Bisignani said. "But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010."

The situation is improving, according to Iata's figures. Passenger numbers are now forecast to rise by 4.5 per cent next year, having dropped by 4.1 per cent in what Mr Bisignani called the "annus horribilis" of 2009.

But yields – the average price per mile – dropped by 12 per cent this year as carriers offered bargain fares in an attempt to fill their planes. And with high-margin business traffic still depressed, alongside the excess capacity in the industry, prices will stay low and revenues squeezed.

The other big issue for the coming year is the oil price. Oil's slump from the all-time high of $148 per barrel in July 2008, down to barely above $30 by January, was a catastrophe for most carriers desperately trying to hedge their fuel purchases. And after a 2009 average of $62, it is forecast to average $75 per barrel in 2010, adding to the pressure on airlines' margins.

"The challenges continue," Mr Bisignani said. "The year 2010 will look much like 2007: the same 2.3 billion passengers and oil at $75. But revenues will be $30bn less."

Latin America was the only profitable area for the aviation business in 2009 – and is expected to retain the accolade in 2010 – largely thanks to the boosted efficiency of its regional airline structures.

European carriers' combined losses of $3.5bn made the region the worst performer of 2009, and its weak performance is set to continue. Iata is predicting another $2.5bn of losses next year, caused by the EU's slow economic recovery and the inflexibility of its airport slot regulations.

Asia-Pacific was a close second this year with losses of $3.4bn but is expected to recover faster to lose just $700m next. The US carriers reported $2.9bn of losses in 2009, their Middle Eastern counterparts $1.2bn. They will lose $2bn and $300m respectively next year, says Iata.