Gloomy skies for the airline industry

Gloomy skies for the airline industry

The IATA’s latest loss estimates for the world’s airline industry have increased to $11 billion in 2009. The regional outlook, however, looks brighter.

September 16, 2009 1:17 by Aarti Nagraj

Airlines worldwide are set to lose $11 billion this year, thanks to rising fuel prices and weak returns, the International Air Transport Association (IATA) has announced. The loss estimate is $2 billion higher than the IATA’s previous projections. Revenues for 2009 are expected to fall by 15 percent, from $455 billion in 2008 to $80 billion.

“This is not a short-term shock,” said Giovanni Bisignani, IATA’s director general and CEO in a press release. “$80 billion will disappear from the industry’s top line. That 15 percent of lost revenue will take years to recover. 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,” he said.

“With cash flows substantially down over the first half of the year, the situation is critical. Larger carriers have built-up cash reserves of $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,” said Bisignani.

He explained that the crisis is not restricted just to airlines, but to the entire aviation industry: “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.

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Tags: 2009, airline, Financial Crisis, loss, Middle East