Outlook for airline industry bleak

(CNS): The International Air Transport Association (IATA) have announced a revised industry financial forecast that would see the global airline industry post losses of US$5.2 billion in 2008 based on an average crude oil price of US$113 per barrel (US$140 for jet fuel). “The situation remains bleak,” said Giovanni Bisignani, IATA’s Director General and CEO.

"The toxic combination of high oil prices and falling demand continues to poison the industry’s profitability. We expect losses of US$5.2 billion this year," he added.

Cutbacks have become the norm throughout the industry with the price of fuel expected to rise to 36% of operating costs, up from 13% in 2002, according to the IATA. North American carriers are expected to post losses of US$5.0 billion in 2008 making them the hardest hit by this industry crisis.

At the same time Asia Pacific is expected to see profits shrink from US$900 million in 2007 to US$300 million this year; European profits will tumble seven-fold 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; and Latin American and African carriers will see losses deepen to US$300 million and US$700 million respectively.

“While there has been some relief in the oil price in recent months, the year-to-date average is US$113 per barrel. That’s US$40 per barrel more than the US$73 per barrel average for 2007, pushing the industry fuel bill up by US$50 billion to an expected US$186 billion this year,” said Bisignani.

In its initial outlook for 2009, IATA said the difficult business environment is expected to continue. Most economies are expected to deliver even weaker economic growth next year, which will negatively impact air travel and freight. With an expected oil price of US$110 per barrel (US$136 for jet fuel) and continued weak growth, industry losses are expected to continue at US$4.1 billion. The 2009 fuel bill is expected to rise, as hedging offers less protection, to US$223 billion comprising 40% of operating expenses.