Airlines expect loss of $9 billion in ’09
With air travel continuing to slump amid a global recession that recently has been compounded by an outbreak of swine flu, airlines are expected to lose about $9 billion this year, or nearly double previous estimates by the industry’s main trade group.
The International Air Transport Assn., which represents 230 airlines accounting for 93% of international traffic, said it also revised the industry’s estimated loss last year to $10.4 billion from $8.5 billion.
“Our industry is in a survival mode,” Giovanni Bisignani, the association’s chief executive, said today in a state-of-the-industry speech to 500 senior airline executives at the group’s annual meeting here. “Today’s situation is unprecedented, the most difficult ever.”
In perhaps one of the gloomiest forecasts, Bisignani said revenues were expected to decline $80 billion, or 15%, to $448 billion this year compared with $528 billion in 2008. The drop would be more than double what airlines experienced shortly after the Sept. 11, 2001, terrorist attacks that grounded air travel in one of the industry’s worst downturns.
Although oil prices have moderated since last summer, the recession has hit all regions of the world, hurting business and leisure travel. Airlines have been slashing airfares to drive demand, but that has not been enough to offset losses from companies that are restricting employees from flying in premium class, the most profitable section of the plane. The outbreak of the H1N1 flu has also added to the airline woes.
“This is the most difficult situation that the industry has faced,” Bisignani said.
The air cargo business is expected to fall even more, 17%, this year, he said.
U.S. carriers may fare better than others as they have cut flights amid lower demand. Still, North American losses are expected to be about $1 billion for the year, reversing earlier estimates of a $100-million profit for the region’s airlines.
On Friday, major U.S. carriers reported that May passenger traffic fell an average of about 10%.
Other regions’ airlines will also be unprofitable, led by losses of $3.3 billion in the Asia-Pacific region and $1.8 billion in Europe.
Among those attending the meeting was Gerard Arpey, chief executive of American Airlines’ parent, AMR Corp.
“We’re in an extraordinarily volatile environment,” Arpey said in an interview.
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