The International Air Transport Association (IATA) has announced a revised global financial forecast predicting higher airline losses totalling US$11 billion in 2009.
This is US$2 billion worse than the previously projected US$9 billion loss due to rising fuel prices and exceptionally weak yields, the association said in a statement on Tuesday from washington.
Industry revenues for the year are expected to fall by US$80 billion or 15 percent to US$455 billion compared with 2008 levels.
IATA also revised its loss estimates for 2008 from a loss of US$10.4 billion to a loss of US$16.8 billion.
This revision reflects restatements and clarification of the accounting treatment of very large revaluations to goodwill and fuel hedges.
IATA industry profit figures strip-out such extra-ordinary items which are not realized in cash terms.
"The bottom line of this crisis-with combined 2008-9 losses at US$27.8 billion-is larger than the impact of 9/11," said Giovanni Bisignani, IATA's Director General and Chief Executive Officer in a briefing in Washington. Industry losses for 2001-2002 were US$24.3 billion. "This is not a short-term shock. US$80 billion will disappear from the industry's top line. That 15 percent of lost revenue will take years to recover," he said.
Conserving cash, careful capacity management and cutting costs are the keys to survival. The global economic storm may be abating, but airlines have not yet found safe harbor. The crisis continues," said Bisignani.
Among three main factors driving the expected losses include demand, yield and fuel.
As for demand, passenger traffic is expected to decline by 4.0 percent and cargo by 14 percent for 2009 (compared to declines of 8.0 percent and 17 percent respectively in the June forecast).
By July, cargo demand was -11.3 percent and passenger demand was -2.9percent. While both are improvements over the lows of -23.2 percent for cargo (January) and -11.1 percent for passenger (March), both markets remain weak.
Turning to yields, he said they are expected to fall 12 percent for passenger and 15 percent for cargo, compared to declines of 7 percent and 11 percent respectively in the June forecast.
The fall in passenger yield is led by the 20 percent drop in demand for premium travel. Cargo utilization remains at less than 50 percent despite the removal of 227 freighters from the global fleet.
"There is little hope for an early recovery in yields in either the passenger or cargo markets," he said.
As for fuel, he said spot oil prices have been driven up sharply in anticipation of improved economic conditions.
Oil is now expected to average US$61 per barrel (Brent) for the year (up from US$56 per barrel in the June forecast). This will add US$9 billion in cost for a total expected fuel bill of US$115 billion.
"The optimism in the global economy has seen passenger and freight volumes rise, but that is the only bright spot."
"Rising costs and falling yields have squeezed airline cash flows. The sharp decline in yields will leave a lasting mark on the industry's structure. And revenues are not likely to return to 2008 levels until 2012 at the earliest," said Bisignani. "With cash flows substantially down over the first half of the year, the situation is critical. Larger carriers have built-up cash reserves of US$15 billion-a war chest that is warding off a major cash crisis. But the outlook for small and medium sized carriers-with limited options to raise cash-is much more severe," he said.
On a regional basis, he said Asia-Pacific carriers will post losses of US$3.6 billion, similar to the US$3.3 billion previously forecast.
Worst hit by the recession and fuel hedging losses at the end of 2008, the region's carriers are the first to benefit from reviving Asian economic growth and the modest restocking of inventories in the West.
Bisignani said: "This is not an airline-only crisis. There is less cash coming into the industry and the entire value chain must be prepared for change."
"All our business partners-including airports, air navigation service providers, global distribution systems-must be prepared to cut costs and improve efficiencies. Some airports have delivered cost reductions, but not in line with the magnitude of the changes to the industry cash flow," he said. "Governments need a wake-up call to create a policy framework that supports a competitive air transport sector capable of driving economic expansion.
"But European governments are fixated on using environment as an excuse to squeeze more taxes out of the industry. And the US is not moving fast enough to deliver the critical advantages to competitiveness that NextGen air traffic management will bring," said Bisignani.
"We don't want bailouts. But we need governments to look more seriously at this sector by investing in efficient infrastructure, replacing the proliferation of environmental taxes with a global solution for the environment and giving airlines normal commercial freedoms to merge where it makes sense and to access markets and global capital like any other business," said Bisignani.
Source : Bernama
[tags : malaysiahotelnews hotels malaysia resorts news travel tourism travel tourism news]