Global airline industry faces $5.2-billion loss in 2008

Airline industry worldwide is expected to suffer combined losses to the tune of about $5.2 billion in 2008, which is almost $3 billion higher than what was forecast in June 2008, according to the International Air Transport Association (IATA).

This loss could be followed by a $4.1-billion loss in 2009 as economies slow down and high fuel costs eat away at earnings though traffic may increase by 2.9%, down from an estimated 4.5%, Giovanni Bisignani, chief executive of the International Air Transport Association, told a news conference in Montreal, Canada, on September 3, 2008. 

The organisation based its estimate of loss on an average oil price of $113 a barrel in 2008. Fuel is expected to rise to 36% of the operating costs of airlines – up from 13% in 2002. 

The International Air Transport Association is an international industry trade group of airlines headquartered in Montreal, Quebec, Canada. The main objective of the IATA is to assist airline companies to achieve lawful competition and uniformity in prices. Today, IATA represents about 230 airlines comprising 94% of scheduled international air traffic. The organisation also represents, leads and serves the airline industry in general.  

The IATA had raised the annual loss estimate for a fifth time in 12 months after passenger growth fell to a 5-year low in July 2008 and the number of airlines suspending operations or going bankrupt in 2008 had risen.  

Airlines worldwide had collectively earned a profit of $5.6 billion in 2007, the first instance of making profits since the September 11, 2001, terror attacks. 

The airline industry has lost over $36 billion since 2001. 

Giovanni Bisignani said: “We’re still in a perfect storm of rising costs and falling demand. When we made our last forecast we knew the situation was bad, but we didn’t know how bad it would get. Profitability deteriorated dramatically in the first half.” 

He advised the airline industry to “fasten your seatbelts for at least another two years,” the time it may take for the global economy to get stronger. 

In 2008, airline traffic worldwide is likely to go up only by 2.8%, compared with a previous forecast of 3.9% and a growth of 5.3% in 2007 and 2006, according to the IATA. Traffic rose by 1.9% in July 2008 – the lowest monthly increase since the severe acute respiratory syndrome (SARS) epidemic of 2003. 

Region-wise, carriers in North American are expected to suffer losses amounting to 5 billion in 2008 – rendering them the worst-hit by the current crisis. 

Profits in the Asia-Pacific region is predicted to get reduced to 300 million in 2008 from 900 million in 2007. 

As for Europe, airlines’ profits nosedived seven-fold from 2.1 billion in 2007 to 300 million in 2008. 

In the while Middle-East, profits are expected to fall by 100 million to 200 million. 

According to estimates by the International Air Transport Association, the losses of airlines in the Latin American countries are likely to slip further to 300 million.