Dec 10, 2008

Business - Airlies face worst crisis for 50 years;IATA

Global airlines are heading into their worst business crisis for 50 years with carriers facing possible collapse, revenues tumbling and hundreds of thousands of jobs at risk, the industry body IATA said on Tuesday.

In a forecast for 2009, it said losses were expected to total $2.5 billion despite a boost from falling oil prices, with European airlines' deficits soaring tenfold over 2008 to $1 billion and Asia-Pacific's doubling to $1.1 billion.

"The outlook is bleak and the chronic industry crisis continues as we face the toughest revenue environment in 50 years," said Giovanni Bisignani, director-general of the organisation which groups some 230 international airlines.

IATA's chief economist, Brian Pearce, said the turbulence -- largely due to the global financial crisis -- was also likely to hit at aircraft manufacturers like Airbus and Boeing as orders were deferred or cancelled.

The forecast for 2009, based on an expected average oil price of $60 a barrel, was scaled down from the $4.1 billion IATA had foreseen in September when spot oil prices were around $140 and looked set to rise.

IATA also cut its estimate for losses this year to $5 billion from the $5.2 billion because of lower fuel costs.

But Pearce said European and Asia-Pacific carriers who had hedged their oil outlays by buying in advance would be bearing the heavier costs until well into next year and were unlikely to reap the full benefit of the drop until 2010.

U.S. airlines, by contrast, would make a small profit of some $300 million, just 1 percent of their overall revenue, after massive losses of $3.9 billion this year, largely because they had done little hedging and had cut flight capacity.


Bisignani, speaking at IATA's Geneva headquarters, said he saw "300,000-400,000 jobs at risk" among the some 32 million people around the world employed in air transport and related industries like travel, tourism and airports.

Labour had to understand "that jobs disappear when costs don't come down," he declared. "Unless airlines have the flexibility to cut costs," said Pearce, "they might not be around when the recession ends."

Member airlines of IATA, the International Air Transport Association, represent 93 percent of scheduled international flights. The until recently booming budget carriers do not belong to it but are also reporting major problems.

Bisignani said IATA carrier revenues in 2009 were likely to fall -- from $536 billion this year to $501 billion -- for the first time since 2002, when business dipped sharply after the September 11, 2001 attacks.

The IATA chief said the ferocity of the international economic crisis had overshadowed gains made from airline restructuring and greater fuel efficiency in recent years, he said. "The industry remains sick," he added.

According to the IATA forecast, passenger traffic is set to fall 3 percent next year, the first drop since 2001, while cargo is predicted to be 5 percent lower in 2009 after contracting an estimated 1.5 percent this year.

Air cargo, which accounts for 35 percent of goods traded internationally, is generally seen as a strong indicator of the global economy. The drop will hit hard at Asia-Pacific carriers, who make up 45 percent of the air cargo market, IATA said.

In October this year, there was a 7.9 percent decline in goods shipped by air, the fifth month in a row of increasingly severe falls -- a clear indication that "the worst is yet to come" for airlines and the slowing global economy, IATA said.

(Editing by Stephanie Nebehay and David Cowell)

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