Prices up, passengers down: airline industry awaits gloomy 2009

The global airline industry will lose $5.2bn in 2008. That’s according to the International Air Transport Association (IATA), which says that the losses are due to the combination of high oil prices and falling demand. Middle Eastern airlines profits will drop by $100m to $200m.

“The situation remains bleak,” says Giovanni Bisignani, IATA’s director general and CEO.

While fuel prices have gone down, the average price of oil remains $113 per barrel, up from $73 per barrel last year. So, the industry fuel bill will shoot up by $50bn to an expected $186bn this year, says the IATA. Fuel is expected to use 36 percent of operating costs, up from 13 percent in 2002.

According to the association’s traffic figures, July year-on-year passenger demand growth fell to 1.9 percent, the lowest in five years. Meanwhile, capacity increased by 3.8 percent.

The IATA’s outlook for 2009 is also not very cheerful. With an expected oil price of $110 per barrel, the industry losses are expected to be $4.1bn. The fuel bill is expected to rise to $223bn comprising 40 percent of operating expenses.

Currently, the global airline industry provides jobs to 32 million people and supports $3.5 trillion in economic activity.

This gloomy news hasn’t stopped Gulf Air from placing an order for another eight 787 Dreamliners from Boeing.

At the Farnborough Air show earlier, airlines from the region shelled out the biggest orders, with Etihad topping the list. The Abu Dhabi carrier placed 55 firm orders with Airbus worth $12bn, and 45 aircraft order from Boeing worth $9.4bn.
Dubai Aerospace Enterprise placed an order for 100 Airbus planes worth $12.6bn, Fly Dubai, Emirates’ low cost carrier is buying 50 Boeing 737-800s, worth around $3.7bn at list prices. Saudi Arabian airlines and Qatar airways also placed big orders at Farnborough.