Despite Affordable Fuel, Airlines Brace for $2.5B Global Loss in 2009, IATA Says

Although fuel prices have fallen dramatically in the last quarter, the global airline industry still expects to see a multibillion-dollar loss in 2009, according to the Geneva, Switzerland-based International Air Transport Association (IATA), which released a revised industry outlook last week—it's worst revenue outlook in 50 years.

While affordable fuel has no doubt lessened the impact of the global economic recession on airlines—based on a reduced average oil price of $60 per barrel, IATA has scaled back its original estimate for total losses to $2.5 billion in 2009 from $4.1 billion, and to $5.0 billion in 2008 from $5.2 billion—it will not be enough to turn the entire industry around, according to IATA Director General and CEO Giovanni Bisignani.

"The outlook is bleak," he said in a statement. "The chronic industry crisis will continue into 2009 with $2.5 billion in losses. We face the worst revenue environment in 50 years."

That revenue environment will be 6 percent smaller in 2009, according to IATA, which predicts global airline revenues of $501 billion next year, versus $536 billion this year.

Revenue isn't the only thing falling, either. IATA estimates that passenger traffic will fall 3 percent next year—the first drop since 2001, it says. Cargo, meanwhile, is expected to be 5 percent lower in 2009 than in 2008.

"Airlines have done a remarkable job of restructuring themselves since 2001," Bisignani continued. "Non-fuel unit costs are down 13 percent. Fuel efficiency has improved by 19 percent. And sales and marketing unit costs have come down by 13 percent […] But the ferocity of the economic crisis has overshadowed these gains and airlines are struggling to match capacity with the expected 3 percent drop in passenger demand for 2009. The industry remains sick. And it will take changes beyond the control of airlines to navigate back into profitable territory."

Despite global losses, IATA predicts a $300 million profit for North American airlines exclusively in 2009. Said IATA, "An early 10 percent domestic capacity reduction in response to the fuel crisis has given the [North American] region's carriers a head start in combating the recession-led fall in demand."