IATA Predicts Airline Losses in 2009 and Decline in Consumer Demand

The international airline industry faces a tough year according to the International Air Transport Association (IATA), who released international scheduled traffic results for both December 2008 and the full-year. IATA said that December 2008 global international cargo traffic plummeted by 22.6 percent compared to December 2007 while international passenger traffic showed a 4.6 percent drop. The international load factor stood at 73.8%.

“The 22.6 percent free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9 percent,” said Giovanni Bisignani, IATA’s director general and CEO.”  Air cargo carries 35 percent of the value of goods traded internationally. For the full-year 2008, international cargo traffic was down 4.0 percent; passenger traffic showed a modest increase of 1.6 percent and the international load factor stood at 75.9 percent.

“2009 is shaping up to be one of the toughest years ever for international aviation. The 22.6 percent drop in international cargo traffic in December puts us in un-charted territory and the bottom is nowhere in sight. Keep your seatbelts fastened and prepare for a bumpy ride and a hard landing,” said Bisignani.

Airlines registered a US$5 billion loss in 2008. For 2009 IATA is forecasting a further loss of US$2.5 billion based on a fuel price of US$60 per barrel, a decline of 3.0 percent in passenger volumes, a drop of 5.0 percent in cargo traffic and yield deterioration of 3.0 percent. Industry revenues are expected to contract by US$35 billion (from US$536 billion in 2008 to US$501 billion in 2009).

In the face of this economic crisis, IATA is calling for major structural changes to the industry. “We don’t want bail-outs. But we need to change the ownership rules. Almost every other business has the freedom to access to global capital and the ability to merge across borders where it makes sense. To manage in this crisis, airlines need the same management tools,” said Bisignani.

Bolstered by year-end advance-booked leisure travel, the 4.6 percent decline in December passenger demand was less dramatic than the fall in cargo. A 1.5 percent cutback in supply could not keep pace with falling demand, resulting in a 2.4 percent decline in the December load factor to 73.8 percent. “Airlines are struggling to match capacity with fast-falling demand. Until this comes into balance, even the sharp fall in fuel prices cannot save the industry from drowning in red ink,” said Bisignani.

“Yields are also under attack with a sharp drop in November premium traffic,” said Bisignani. For November, IATA reported an 11.5 percent drop in the number of premium tickets issued globally.

IATA’s analysis of passenger traffic includes:  Full-year traffic results show a 1.6 percent increase in demand which is dramatically down from the 7.4 percent recorded in 2007. Capacity grew by 3.5 percent resulting in a full-year average load factor of 75.9 percent (down from the 77.3 percent recorded for 2007).  North American airlines saw December demand drop by 4.3 percent, far outstripping the 0.7 percent cut in international capacity. While North American carriers had made early cuts in domestic capacity of about 10 percent, this is the first month registering a cut in international operations. Nonetheless, the region recorded the highest load factor at 78.1 percent.

Visit www.iata.org.

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