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Airlines face worse losses in slump than after 9/11: IATA

india Updated: Sep 16, 2009 00:40 IST

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World airlines face losses of 27.8 billion dollars for 2008 and 2009 as the global economic downturn takes a heavier toll than the September 11 attacks, industry association IATA warned on Tuesday.

"That is larger than the losses of 24.3 billion dollars the industry lost in 2001 and 2002 after the attacks of September 11," said Giovanni Bisignani, head of the International Air Transport Association.

As the economic crisis put the brakes on travel, losses booked by airlines around the world reached 16.8 billion dollars in 2008.

IATA on Tuesday hiked its loss forecast for 2009 to 11 billion dollars from the 9.0 billion dollars forecast earlier while a 3.8 billion dollar deficit was predicted for 2010.

"The outlook for 2010 is for more widespread, but still weak, economic growth ... Losses will diminish but a recovery to net profit looks unlikely until 2011," IATA said.

Bisignani noted that passenger volumes are expected to improve, showing a decline of 4.0 percent for the year, up from a June forecast for a fall of 8.0 percent.

"Unfortunately, these better volumes have a limited impact on the bottomline ... the reason is that the yield has fallen dramatically," he said.

Business and first class traffic, where airlines typically make most of their money, was down some 21 percent in June, compared with 5.0 percent for economy class, Bisignani said.

To business passengers, airlines have heavily discounted fares for these premium seats, thereby also diminishing yields.

At the same time, as expectations of a world economic recovery grow, fuel prices are rising, further depressing airline earnings.

"Prices of fuel are increasing in anticipation of the recovery that we do not see in our business," lamented Bisignani.

"Even with better volumes, we don't see industry revenues returning to 2008 levels until 2012-2013," he said, pointing out that following the September 11 attacks, it took 3.5 years to recover lost revenues. European carriers are expected to be worst hit this year, with losses of 3.8 billion dollars, twice as much as the 1.8 billion dollars initially predicted as long-haul markets are hit badly.

Asian-Pacific airlines should post losses of 3.6 billion dollars, slightly up from the previous forecast of 3.3 billion dollars. While they suffered the most damage in 2008, these carriers are expected to be among the first to benefit from recovering Asian economies.

North American carriers should lose 2.6 billion dollars, more than twice the earlier estimate of 1.0 billion dollars, said IATA, noting that high levels of debt and unemployment will likely hold back travel demand.

Middle Eastern and African airlines are each expected to lose 500 million dollars while Latin American carriers should break even.