IATA’s Latest Forecast Grimmer than Ever

 - March 24, 2009, 5:38 AM

The International Air Transport Association (IATA) issued an adjusted outlook for the global air transport industry today that forecasts losses of $4.7 billion for the year. The prediction nearly doubles the projection for losses it issued only three months ago, when it forecast a $2.5 billion loss for 2009.

IATA expects revenues to fall by 12 percent to $467 billion. By comparison, the decline following the events of Sept. 11, 2001, saw industry revenues fall by about 7 percent.

“The state of the airline industry today is grim,” said IATA director general and CEO Giovanni Bisignani. “Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago…Combined with an industry debt of US$170 billion, the pressure on the industry balance sheet is extreme.”

IATA expects passenger traffic to contract by 5.7 percent during the year, and an even sharper fall in premium traffic. Meanwhile, it expects cargo demand to decline by 13 percent. The association’s December outlook forecast a 3-percent drop in passenger demand and a 5-percent fall in cargo demand. It now expects yields to decline by 4.3 percent.

“Fuel is the only good news,” said Bisignani, referring to an expected fall in the industry’s fuel bill to 25 percent of operating costs, compared with 32 percent in 2008. “But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care. Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand.” 

Of all the major regions examined by IATA, North America remains the only relative bright spot, as the association sees a combined $100 million profit, compared with its December forecast of a $300 million profit. It expects a 7.5-percent cut in capacity to match a 7.5-percent fall in demand and carriers to benefit from lower spot prices for fuel.

“The prospects for airlines are dependant on economic recovery,” concluded Bisignani. “There is little to indicate an early end to the downturn. It will be a grim 2009. And while prospects may improve toward the end of the year, expecting a significant recovery in 2010 would require more optimism than realism.”