According to the Associated Press, the International Air Transport Association (IATA) believes that world airlines will lose $4.7 billion this year. A loss of this size is more than world airlines saw following the September 11, 2001 terrorist attacks. The industry group attributes the losses to "the rapid deterioration of the global economic conditions." This revision basically doubles the earlier forecast from December, causing the CEO of the IATA, Giovanni Bisignani, to note that "The state of the airline industry today is grim ... Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago." The IATA predicts revenues will drop by $62 billion to $467 billion, a 12% decline.
Bisignani predicts that "resizing the industry will be much tougher than the adjustments we saw after 9/11 or SARS." Revenue dropped roughly 7% from 2000 to 2002 because of the 9/11 attacks, and SARS led to a major decline in Asian air travel.
The IATA represents 230 airlines across the globe, and believes passenger traffic will fall by 5.7% during the year, with cargo demand falling by 13%. Both of these forecast numbers are "significantly worse" than December's forecast for a 3% drop in passenger demand and a 5% fall in cargo demand. Finally, the IATA predicted a loss of $8.5 billion, up from the earlier estimate of a $5-billion loss.
While the outlook for North America is far better than for Asian or European carriers, this is definitely bad news for industry "heavyweights" like Delta Airlines and UAL Corp. These two airlines are both wallowing near the $5 range and face considerable overhead pressure. I wouldn't bank on airline stocks taking off any time soon.
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Reader Comments (Page 1 of 1)
3-25-2009 @ 5:50AM
al coholic said...
A single national airline company is likely in our future.