Airline Industry still hurting

The International Air Transport Association (IATA) is presently holding its annual meeting in Kuala Lumpar, and despite some signs of an easing to the global recession, IATA are of the view that this will not be reflected in airline financial performance for some time.

Having lost $10.4 billion in 2008 and despite fuel savings of $59 billion in 2009, IATA has revised its airline financial forecast for the current year to a $9 billion loss.  Scary stuff.  And it’s worldwide.  North American carriers who have slashed routes and costs expect to see red figures of $1 billion.  European carriers are looking at a loss of $1.8 billion.  Asia Pacific airlines expect to drop a massive $3.3 billion, while Middle East carriers are looking at red ink to the tune of $1.5 billion.  The remainder of the projected losses will arise in Latin America and Africa.

After 9/11 airline revenue fell by 7%, but in the midst of this global recession revenues have fallen by $80 billion, or 15%.

IATA Direct General, Giovanni Bisignani, doesn’t see facts to support optimism.  He is of the view that “whether this crisis is long or short the world is changing.  Travel budgets have been slashed and consumers will need to reduce their debt.  It will not be business as usual in the port-crisis world”.

He went on to describe the airline industry as being in survival mode.  Consumer confidence is low, and their need to reduce debt means less cash to spend.  IATA sees business habits changing too as corporate budgets are slashed and video conferencing becomes much more popular.

The IATA view is supported by the Association of European Airlines who said that there remains no indication of when an economic recovery might begin, and that the current downturn could have a “profound impact on the market well past this year”.

Some better news is that aviation’s emissions will fall by 7% in 2009, 5% from the fall in demand and 2% as a result of the industry’s strategy to address climate change.  And the industry remains committed to achieving carbon neutral growth by 2020, and a 50% reduction in emissions by 2050.

But first its survival, and no one would doubt the resilience and capability of the aviation industry to turn challenges into opportunities to be safer, greener and profitable once more.  As an example of that determination, the new Boeing 787 finally appears set for its first flight before the end of this month, an event that could shape the future of commercial aviation.  This twin engined fuel efficient, emissions friendly aircraft which can carry up to 250 passengers for distances up to 8,000 miles, has already signed up 56 customers who have ordered a total 866, a record number for a pre-delivery aircraft.

IATA is confident that recovery will come, but it’s not just around the corner yet.

June 9th 2009

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