GLOOMY PREDICTIONS

Airlines could lose $9 billion

06-09-2009 | AP

Revenues are expected to decline an unprecedented 15 percent from a year ago and the weakness will persist into 2010

Panama Star KUALA LUMPUR. The world's airlines will collectively lose $9 billion this year — nearly double the previous projections — and face a slow recovery as the economic crisis saps air travel and cargo demand, an industry body warned Monday.

The International Air Transport Association, which represents 230 airlines worldwide, increased its loss estimate from the $4.7 billion it forecast in March, reflecting a "rapidly deteriorating revenue environment."

Although there has been growing signs of a bottoming out of the recession, IATA said the industry was severely hit in the first quarter with 50 major airlines reporting losses of more than $3 billion. Weak consumer confidence, high business inventories and rising oil prices pose headwinds for future recovery, the association said during a two-day global aviation conference in Kuala Lumpur. Revenues are expected to decline by $80 billion — an unprecedented 15 percent from a year ago — to $448 billion this year, and the weakness will persist into 2010, it said. "There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced," said IATA Chief Executive Giovanni Bisignani.

The Geneva-based association also revised its estimated loss for last year to $10.4 billion from $8.5 billion previously. It said passenger traffic for 2009 is expected to contract by 8 percent from a year ago to 2.06 billion travelers. Cargo demand will decline by 17 percent and some 100,000 jobs worldwide are at risk, it said.

The association expects the industry fuel bill to shrink by $59 billion, or 36 percent, to $106 billion this year, accounting for 23 percent of operating costs with an average oil price of $56 a barrel. But crude oil prices have rallied in recent weeks, breaching the $70 a barrel level on Friday on hopes of economic recovery.

Bisignani urged governments to avoid protectionist policies and reiterated his call for more liberalization such as the lifting of restrictions on routes and cooperation between airlines to bolster the global airline industry. "It would be a cheap and effective stimulus...liberalizing key routes today would create 24 million jobs and $490 billion in economic activity," he said. Over the next three years, he said about 4,000 aircraft are scheduled to be delivered. This year alone, airlines are expected to spend about $25 billion to take delivery of more than 800 Western-built jets.