Focus on conserving cash and matching capacity to demand: IATA

International Air Transport Association (IATA) has announced a revised outlook for the global air transport industry with losses of US$4.7 billion in 2009.

Published: 25 Mar 2009

International Air Transport Association (IATA) has announced a revised outlook for the global air transport industry with losses of US$4.7 billion in 2009.

It is worse than IATA’s December forecast for a US$2.5 billion loss in 2009, reflecting the rapid deterioration of the global economic conditions.

Industry revenues are expected to fall by 12 percent (US$62 billion) to US$467 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. Our loss forecast for 2009 is now US$4.7 billion. Combined with an industry debt of US$170 billion, the pressure on the industry balance sheet is extreme,” said Giovanni Bisignani, IATA’s Director General and CEO.

Demand is projected to fall sharply with passenger traffic expected to contract by 5.7 percent over the year. Revenue implications of this fall will be exaggerated by an even sharper fall in premium traffic.

Falling fuel prices are helping to curb even larger losses. With an expected fuel price of US$50 per barrel (Brent oil), the industry’s fuel bill is expected to drop to 25 percent of operating costs (compared to 32 percent in 2008 when oil averaged US$99 per barrel). Combined with lower demand, total expenditure on fuel will fall to US$116 billion (compared to US$168 billion in 2008).

“Fuel is the only good news. 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,” said Bisignani.

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