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Rediff.com  » Business » Airlines worldwide may lose $9 billion: IATA

Airlines worldwide may lose $9 billion: IATA

By Jaishree Balasubramanian in Kuala Lumpur
June 08, 2009 16:46 IST
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The airlines worldwide may collectively lose a whopping $9 billion in 2009, a key aviation body said in its forecast, nearly doubling its March estimate of $4.7 billion loss, spelling a rapidly deteriorating revenue environment for the industry.

The International Air Transport Association's (IATA), revised forecast sees revenues have declined by unprecedented 15 per cent ($80 billion) from $528 billion in 2008 to $448 billion in 2009.

The association, which represent 230 airlines, also revised its loss estimate for 2008 to $10.4 billion from the previous estimate of $8.5 billion.

"There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced," Giovanni Bisignani, IATA Director General and CEO told top leaders of global airline industry at association's 65th annual general meeting.

"After September 11, revenues fell by 7 per cent. It took three years to recover lost ground, even on the back of a strong economy. This time we face a 15 per cent drop -- a loss of revenues of $80 billion --in the middle of a global recession," he added.

Bisignani said the recession has hit the industry hard, robbing it of its premium class passengers who provides a major chunk of its profits.

IATA's revised forecast sees revenues declining an unprecedented 15 per cent from $528 billion in 2008 to $448 billion in 2009. Air cargo demand, an indicator of the health of an economy, is expected to decline by 17 per cent. In 2009, airlines are forecast to carry 33.3 million tonnes of freight, compared to 40.1 million tonnes in 2008.

Passenger demand is expected to contract by 8 per cent to 2.06 billion travelers compared to 2.24 billion in 2008. The revenue impact of falling demand will be further exaggerated by large falls in yields - 11 per cent for cargo and 7 per cent for passenger.

Bisignani also called for a major resizing and reshaping of the entire air transport value chain noting that the industry was in a survival mode.

"Whether this crisis is long or short, the world is changing. Travel budgets have been slashed and consumers will need to reduce their debt. It will not be business as usual in the post-crisis world. The governments, partners and airlines must use this crisis as an opportunity to build a stronger industry. That means resizing and reshaping," he told the industry leaders."

Bisignani said IATA's simplifying the business programme aimed at cutting costs had resulted in $4 billion in cost savings in 2008 with 100 per cent e-ticketing and the deployment of Common Use Self-Service (CUSS) kiosks.

He said another $10 billion could be saved by improving baggage management, travel processes and with e-freight.

Bisignani advised that this was not the time for salary increases. "To protect jobs, we must modernise work practices and we must all do more with less," he added.

Bisignani also urged a resizing and reshaping of the relationship between airlines and governments. "Our relationship with governments must move from punitive micro-regulation to joint problem solving," he said.

Referring to safety issues, he felt that the industry must spend the $5.9 billion that airlines and their passengers paid for security more wisely by focusing on the threats, rather than the 99.9 per cent of travellers who were not a risk.

He asked the governments to coordinate security measures and standards across borders to avoid the double checking of the nearly one million passengers a day who make connections.

"Europe is progressively doing this with one-stop security. It's time to push this much further," he said.

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Jaishree Balasubramanian in Kuala Lumpur
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