Bisignani Says Original Forecast Proved "Very Optimistic"

The International Air Transport Association tracks the airline business all over the world. Its latest forecast is that 2009 will be uglier than first predicted.

Bloomberg reports in a briefing in Kuala Lumpur, IATA CEO Giovanni Bisignani (right) said "Our last industry forecast made in December was for a $2.5 billion loss in 2009. This is now looking very optimistic, and next week we will issue a revised forecast."

During last year's big oil-price run-up, IATA says the 230 carriers it tracks posted 2008 losses of as much as $8 billion. The big improvements forecast for 2009 were based on plunging fuel prices, and drops of 3 and 5 percent in passenger and cargo traffic, respectively.

Instead, IATA says its members saw passenger traffic down 5.6 percent in January, and cargo down a staggering 23 percent. Some airlines can't take advantage of falling fuel prices because they hedged 2009 supply at high prices last year.

Bisignani says a big problem in 2009 is, "business class will be empty," and that airlines will have to cut capacity at a faster pace. He believes some of the 40 airlines which have suspended operations over the last 12 months will not survive to return to service.

"The only good news is that the spot price of fuel is low," he said. "Unfortunately immediate relief is being delayed by hedging at higher prices.”

FMI: www.iata.org