Airlines to lose $4.7bn this year, says Iata

By Sarah Arnott
Wednesday 25 March 2009 01:00

The global aviation industry is expected to lose $4.7bn (£3.2bn) this year, nearly twice the amount predicted just three months ago.

Overall revenues will drop by 12 per cent – or $62bn – to $467bn this year, the International Air Transport Association (Iata) said yesterday. The reduction dwarfs the $23bn loss in the two years after the September 11 atrocities in 2001.

Giovanni Bisignani, the Iata director general, said: "The state of the airline industry today is grim. Demand has deteriorated much more rapidly than could have been anticipated even a few months ago."

The forecasts are significant downward revisions on the last set of Iata predictions. In December, the organisation was forecasting a 3 per cent contraction of passenger demand this year and a 5 per cent fall in cargo. But passenger numbers are now expected to drop 5.7 per cent, and cargo by a whopping 13 per cent. Loss predictions for 2008 have also ballooned from $5bn to $8.5bn, after fourth-quarter losses from fuel hedging and savage drops in both premium travel and freight.

The only good news is that fuel prices are falling fast, after last year's oil price spike. A carrier's fuel bill, as a proportion of total operating costs, will decrease by 8 percentage points to 25 per cent in 2009. The total industry expenditure on fuel this year will come down by 31 per cent to $116bn. But lower fuel prices are not enough. "The industry is in intensive care," Mr Bisignani said. "Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand."

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