World airlines to lose $4.7B U.S. in '09: IATA

The global airline industry will lose almost twice as much in 2009 as first projected merely three months ago, according to a new study released Tuesday.

The International Air Transport Association said the world's carriers will lose $4.7 billion US in the current year, 88 per cent more than the $2.5 billion the Geneva-based industry group forecast back in December.

That prediction is especially dire considering that IATA also revised its forecast for 2008 airline losses, now expected to reach to $8.5 billion for the year compared to the December estimate of $5 billion.

"The state of the airline industry today is grim. Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago," said Giovanni Bisignani, IATA’s director general and chief executive officer.

A gradual recovery will need to wait until 2010, he said.

"While prospects may improve towards the end of the year, expecting a significant recovery in 2010 would require more optimism than realism," said Bisignani.

Slowing economy grounds sector

As the world economy has slowed, so has the demand to fly, particularly by high-paying business customers, and to ship cargo by air.

IATA said revenue for the sector will fall by $62 billion, or 12 per cent, hitting $467 billion for 2009. If true, that plunge would be nearly twice the sales tumble air carriers faced immediately after the Sept. 11, 2001 terrorist attacks, when flyers saw revenue fall by seven per cent.

In the current year, passenger traffic will slip by 5.7 per cent, up from the three per cent contraction IATA expected back in December.

Similarly, cargo demand will decline by 13 per cent in 2009, IATA predicted.

North American carriers to post profits

Airlines in North America will fare relatively better than those in other regions. Carriers in this part of the world are expected to post profits totalling $100 million. Flying demand will drop by 7.5 per cent but will be matched by a reduction in carrier capacity of the same amount.

Cutting flight routes and removing aircraft from a carrier's fleet can save a company money by lowering operational costs.

By contrast, European carriers are forecast to lose $1 billion while those airlines in Asian will post an even worse performance with IATA predicting red ink in the range of $1.7 billion in 2009.