The International Air Transport Association (Iata) on Tuesday forecast that industry losses for 2009 would be half of that experienced in 2008, however, the industry was still expected to make a $2,5-billion loss next year.

The industry was expected to suffer losses of around $5-billion this year.

The smaller loss was mostly owing to the rapid decline in fuel prices. Iata stated that fuel prices for 2009 were likely to level out at $60 a barrel, for a total bill of $142-billion.

“This is $32-billion lower than in 2008, when oil averaged $100 a barrel,” it stated.

Passenger traffic for 2009 was also expected to decline by 3%, which would make 2009 the first year to report decline in passenger traffic since the 2,7% drop in 2001. Cargo traffic was also expected to decline by 5%, following a 1,5% decline in 2008.

The results in industry losses were also owing to a shift in the results of the North American carriers. Iata noted that carriers in the region had been hardest hit by the high fuel prices with very limited hedging. However, an early 10% reduction in domestic capacity in response to the fuel crisis, had given the region’s carriers a head-start in combating the recession-led fall in demand.

The lack of hedging was now also allowing the region’s carriers to take full advantage of the rapidly declining fuel prices. “As a result, North American carriers are expected to post a small profit of $300-million in 2009,” the association stated.

Iata DG and CEO Giovanni Bisignani noted that the North American region would be the only region in the black, but that the expected $300-million profit was less than 1% of its revenue. He added that 2009 was bound to be another tough year for everyone.

The Asian-Pacific carriers would see losses of about $1,1-billion in 2009, which would be more than double the figure predicted for 2008. “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,” Iata noted.

Japan, the region’s largest market, had officially announced a recession earlier this year, and China and India were 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 November.”

European carrier losses would increase ten-fold to $1-billion, Iasa stated, with the region’s main economies 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 impact.”

African airlines would see losses of $300-million, and the region’s carriers faced strong competition. “Defending market share would be the main challenge,” Iata reported.

Middle Eastern airlines would see losses double to $200-million, and the challenge for the region would be to match capacity to demand, as fleets expanded and traffic slowed. The losses forecast for the Latin American carriers were also $200-million, as the strong commodity demand that had driven the region’s growth, now had been severely curtailed.

Bisignani noted that despite the improvements made by industry participants and Iata, as they related to fuel- and cost-efficiency, the ferocity of the economic conditions had overshadowed the gains, and airlines were struggling to match capacity with the expected 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.”

Edited by: Mariaan Webb

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