Airlines to suffer $5.6 billion loss in 2010: IATA

Wednesday, December 16, 2009
GENEVA, Switzerland: Airlines are set to suffer bigger than expected losses of $5.6 billion in 2010 despite a recovery in passenger traffic, the air transport industry association IATA said on Tuesday.

“The International Air Transport Association revised its financial outlook for 2010 to an expected $5.6 billion global net loss, larger than the previously forecast loss of $3.8 billion,” the association said in a statement.

The figure nonetheless marked a halving of the 11-billion-dollar losses airlines are expected to suffer this year, as a patchy economic recovery slowly gained ground.

“We are ending an Annus Horribilis that rings to a close the 10 challenging years of an aviation Decennus Horribilis,” said IATA Director General Giovanni Bisignani.

“Between 2000 and 2009 airlines lost 49.1 billion, which is an average of $5.0 billion per year,” he added.

Passenger demand was expected to grow by a stronger than expected 4.5 per cent, following a decline of 4.1 per cent in 2009, as passenger numbers return to the 2007 peak and 2.28 billion people fly next year.

“The worst is behind us,” said Bisignani. “Demand will likely continue to improve and airlines are expected to drive down non fuel unit costs by 1.3 per cent.”

“But fuel costs are rising and yields are a continuing disaster,” Bisignani told journalists.

Emerging markets were leading the improving economic climate, but the recovery was at its weakest and slowest in the biggest air travel markets, in Europe and across the Atlantic, IATA chief economist Brian Pearce underlined.

IATA officials warned that significant cuts, including on wages, would be the norm, as airlines struggled with poor yields and ongoing pressure for cheaper fares from cash and credit strapped consumers as well as cost-cutting corporate flyers.

The ongoing squeeze on financial markets and bank lending could put some small and medium sized airlines at risk after 30 went under this year, Bisignani warned.

Meanwhile the renewed rise in fuel costs were adding to the structural pressures on airlines. IATA is betting on an average oil price of $75 a barrel in 2010.