By Rob Morris
International trade body says financial blow will be greater than first estimated.
The Middle East airline industry will suffer greater financial losses in 2009 than first anticipated, the International Air Transport Association (IATA) said on Tuesday.
The airline body has increased the region’s likely losses to $900m from $800m following a decline in global passenger demand.
Meanwhile, IATA has revised its 2009 losses for the global airline industry to $4.7bn from $2.5bn, reflecting the “deterioration” of worldwide economies.
Despite forecasting big losses, IATA said the Middle East would be the only region to experience growth in traveller demand this year.
This rise, however, will be significantly lower than double-digit growth recorded in previous years.
IATA also said rising passenger demand would be offset by the region’s 3.8 percent capacity growth.
“The state of the airline industry today is grim,” said IATA’s director general and CEO Giovanni Bisignani.
“Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago.
“Our loss forecast for 2009 is now $4.7bn. Combined with an industry debt of $170bn, the pressure on the industry balance sheet is extreme.”
Industry revenues are expected to fall by 12.0% ($62bn) to $467bn. In contrast, the previous decline following September 11 saw industry revenues drop $23bn from 2000 to 2002.
Global passenger and cargo demand are expected to contract this year by 5.7 and 13 percent respectively.
One positive was the drop in fuel price to around $50 per barrel from $147 last July. According to IATA, the industry’s oil bill should drop 25 percent this year from $168bn to $116bn, cutting operating costs by 25 percent.
Bisignani said: “Fuel is the only good news. But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care. Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand.”
He added anyone expecting a quick recovery should think again.
“The prospects for airlines are dependant on economic recovery,” Bisignani said. “There is little to indicate an early end to the downturn and it will be a grim 2009. And while prospects may improve towards the end of the year, expecting a significant recovery in 2010 would require more optimism than realism.”