'Worst Revenue Environment in 50 Years'
The International Air Transport
Association (IATA) released its forecast for 2009, showing an
industry loss of US$2.5 billion. All regions, except the US, are
expected to report larger losses in 2009 than in 2008.
Forecast highlights included:
- Industry revenues are expected to decline to US$501 billion.
This a fall of US$35 billion from the US$536 billion in revenues
forecasted for 2008. This drop in revenues is the first since the
two consecutive years of decline in 2001 and 2002.
- Yields will decline by 3.0% (5.3% when adjusted for exchange
rates and inflation).
- Passenger traffic is expected to decline by 3%, following
growth of 2% in 2008. This is the first decline in passenger
traffic since the 2.7% drop in 2001.
- Cargo traffic is expected to decline by 5%, following a drop of
1.5% in 2008. Prior to 2008, the last time that cargo declined was
in 2001, when a 6% drop was recorded.
- Oil prices are expected to average US$60 per barrel for a total
bill of US$142 billion. This is US$32 billion lower than in 2008
when oil averaged US$100 per barrel.
IATA Director General and CEO
Giovanni Bisignani said, "The outlook is bleak. The chronic
industry crisis will continue into 2009 with US$2.5 billion in
losses. We face the worst revenue environment in 50 years."
IATA also updated its forecast for 2008 to a loss of US$5.0
billion. This is slightly improved from the US$5.2 billion loss
projected in the Association's September forecast, primarily as a
result of the rapid decline in fuel prices.
The reduction in industry losses from 2008 to 2009 is primarily
due to a shift in the results of North American carriers. Carriers
in this region were hardest hit by high fuel prices with very
limited hedging and are expected to post the largest industry
losses for 2008 at US$3.9 billion. An early 10% domestic capacity
reduction in response to the fuel crisis has given the region's
carriers a head-start in combating the recession-led fall in
The lack of hedging is now allowing the region's carriers to
take full advantage of rapidly declining spot fuel prices. As a
result, North American carriers are expected to post a small profit
of US$300 million in 2009. "North America will be the only region
in the black, but the expected US$300 million profit is less than
1% of their revenue. 2009 will be another tough year for everyone,"
All other regions will show losses:
Asia-Pacific carriers will see
losses more than double from the US$500 million in 2008 to US$1.1
billion in 2009. With 45% of the global cargo market, the region's
carriers will be disproportionately impacted by the expected 5%
drop in global cargo markets next year. The region's largest market
- Japan - is already in recession. And its two main growth markets
- China and India - are expected to deliver a major shift in
performance. Chinese growth will slow as a result of the drop-off
in exports. India's carriers, which are already struggling with
high taxes and insufficient infrastructure, can expect a drop in
demand following on from the tragic terror incidents in
- European carrier losses will increase ten-fold to US$1 billion.
Europe's main economies are already in recession. Hedging has
locked in high fuel prices for many of the region's carriers in US
dollar terms, and the weakened Euro is exaggerating the
- Middle Eastern airlines will see losses double to US$200
million. The challenge for the region will be to match capacity to
demand as fleets expand and traffic slows - particularly for
- Latin American carriers will see losses double to US$200
million. Strong commodity demand that has driven the region's
growth has been severely curtailed in the current economic crisis.
The downturn in the US economy is hitting the region hard.
- African airlines will see losses of US$300 million continue.
The region's carriers face strong competition. Defending
market-share will be the main challenge.
Bisignani made special note of the continuing contraction of air
cargo traffic that started in June 2008. "Air cargo comprises 35%
of value of goods traded internationally. The 7.9% decline in
October is a clear indication that the worst is yet to come - for
airlines and the slowing global economy," said Bisignani.
"Airlines have done a remarkable job of restructuring themselves
since 2001. Non-fuel unit costs are down 13%. Fuel efficiency has
improved by 19%. And sales and marketing unit costs have come down
by 13%. IATA made a significant contribution to this restructuring.
In 2008 our fuel campaign helped airlines to save US$5 billion,
equal to 14.8 million tons of CO2. And our work with monopoly
suppliers yielded saving of US$2.8 billion.
"But the ferocity of the economic
crisis has overshadowed these gains and airlines are struggling to
match capacity with the expected 3% drop in passenger demand for
2009. The industry remains sick. And it will take changes beyond
the control of airlines to navigate back into profitable
territory," said Bisignani.
Bisignani outlined an industry action plan for 2009 that
reflected the Association's Istanbul Declaration in June of this
"Labor must understand that jobs will disappear when costs don't
come down. Industry partners must contribute to efficiency gains.
And governments must stop crazy taxation, fix the infrastructure,
give airlines normal commercial freedoms and effectively regulate
monopoly suppliers," said Bisignani.