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Airlines weather storm but face turbulent 2010: IATA

December 30, 2009 Leave a comment Go to comments

Airlines braced for another turbulent year as industry group IATA on Tuesday forecast bigger than expected losses of 5.6 billion dollars in 2010 despite a recovery in passenger traffic.

The International Air Transport Association warned that airlines would still face substantial hurdles with lingering fallout from the financial crisis and more pressure to cut costs after one of their worst years on record.

IATA “revised its financial outlook for 2010 to an expected 5.6 billion dollar global net loss, larger than the previously forecast loss of 3.8 billion dollars,” the association said in a statement.

The figure was nonetheless nearly half the 11-billion-dollar losses airlines are expected to suffer this year.

“We are ending an Annus Horribilis that rings to a close the 10 challenging years of an aviation Decennus Horribilis,” said IATA Director General Giovanni Bisignani.

“Between 2000 and 2009 airlines lost 49.1 billion, which is an average of 5.0 billion dollars per year,” he added.

For passengers there was good news with continuing pressure for cheap fares, but there were warnings that staff and more small to medium sized airlines could suffer as the industry as a whole entered its eighth loss making year.

“The age of cheap air travel is still very much with us,” said IATA chief economist Brian Pearce.

Passenger demand was expected to grow by a stronger than expected 4.5 percent, following a decline of 4.1 percent in 2009, as passenger numbers return to the 2007 peak and 2.28 billion people fly next year.

“The worst is behind us,” Bisignani said.

“But fuel costs are rising and yields are a continuing disaster.”

Pearce said the air transport industry needed to cut costs “where it can just to stay in business,” and claimed that wage costs seemed “out of kilter.”

Bisignani added: “Everybody working in an airline must understand that you have to fasten your seatbelt in turbulent moments.”

Emerging markets were leading the improvement in the overall economic climate, but the “uneven” recovery was at its weakest and slowest in the biggest air travel markets, in Europe and across the Atlantic, Pearce underlined.

“We still expect the recovery in Europe to be the weakest. We’ve seen the economic recovery developing much more strongly in Asia,” said Pearce.

Airlines in North America and Europe were set to account for four-fifths of the losses next year, according to IATA.

Officials warned that significant cuts would be the norm, as airlines struggled with poor yields and ongoing pressure for cheaper fares from cash and credit strapped consumers as well as cost-cutting corporate flyers.

The ongoing squeeze on financial markets and bank lending could put some small and medium sized airlines at risk after 30 carriers went under this year, IATA warned.

“There are some headwinds to this recovery. The first is the banks,” said Pearce.

While major airlines had managed to raise much needed cash on financial markets, small to medium sized airlines were still struggling to gain credit from banks, he added.

Meanwhile consumer debt was also an issue, sapping prospective passengers.

“We think this is going to big headwind in the main developed economies, for probably a number of years,” said Pearce.

Bisignani warned that the fragmented approach to the global airline industry in term of regulation, access to routes, national ownership restrictions and even finance was a severe drawback in hard times.

“We need to look at the industry’s structure as a cause of the horrible decade,” he added.

IATA represents some 230 carriers that account for more than 90 percent of scheduled air traffic, but does not include most of the budget airlines.

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