Airlines Will Lose US$5.2bn This Year
05.09.2008 (17:57)
IATA estimates that the airline industry will post losses of US$5.2 billion in 2008.This forecast is based on an average crude oil price of US$113 per barrel (US$140 for jet fuel), eyefortransport.com reports.
According to IATA's director general & CEO, Giovanni Bisignani, while there has been some relief in the oil price in recent months, the year-to-date average is US$40 per barrel more than the average for 2007, pushing the industry fuel bill up to an expected US$186 billion this year - around 36% of operating costs.
IATA also announced that cargo demand in July dropped by 1.9% compared to 2007, with Asia-Pacific carriers being the hardest hit with a 6.5% drop in demand.
In terms of regions, Bisignani says that while some regions will show small profits, the negative impact of the industry crisis is universal:
* North American carriers are expected to post losses of US$5 billion in 2008 making them the hardest hit by this industry crisis.
* Asia Pacific is expected to see profits shrink from US$900 million in 2007 to US$300 million this year.
* European profits will plummet from US$2.1 billion in 2007 to US$300 million in 2008.
* Middle Eastern profits will drop by US$100 million to US$200 million.
* Latin American and African carriers will see losses of US$300 million and US$700 million respectively.
In its initial outlook for 2009, IATA expects the difficult business environment to continue, with industry losses of around US$4.1 billion, and a fuel bill of approximately US$223 billion accounting for 40% of operating expenses.
Bisignani pointed out that more airlines have folded in 2008 than in the aftermath of 9.11, and while efficiency gains are critical, they cannot fully absorb the impact of skyrocketing fuel prices.
He added that the current crisis highlights the need for greater commercial freedom. "When fuel goes from 13% of your costs to 40% in seven years with an increased cost implication of US$183 billion, you simply cannot continue to do business in the same way. Fundamental change is needed," he concluded.
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