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Airlines’ losses to exceed US $2.5 billion this year

Posted on: March 20, 2009


Bernama – Friday, March 20

KUALA LUMPUR, March 19 (Bernama) — Losses suffered by airlines worldwide this year are expected to exceed the US$2.5 billion forecast under the current economic crisis which is affecting both cargo and passenger travel.

International Air Transport Association (IATA) director-general and chief executive officer, Giovanni Bisignani, said for passenger growth, fuel cost was becoming less of a problem while airlines were now struggling to fill the premium seats.

“What is most affected is not the load factor but the premium traffic. Business classes are empty. The airlines make money in the front and recover the cost in economy. When the business class disappears, it is a problem,” he told reporters at the MICCI Leaders Luncheon 2009 here today.

In January 2009, premium business in Asia Pacific fell by 22 percent, he said.

Bisignani said the industry was expecting to save US$30 billion in fuel this year, especially with most airlines coming off their hedging somewhere in the summertime.

“Our last industry forecast made in December was for a US$2.5 billion loss in 2009 based on a three percent fall in passenger demand and a five percent drop in cargo. This is now looking very optimistic and next week we will issue a revised forecast,” he said.

Even though recovery is expected to start in 2010, it is still difficult to see profit then, he added.

According to Bisignani, cargo will be a clear indicator on when the economy improves.

Global cargo was down by 28.1 percent with Asia Pacific carriers being the biggest players and holding 44 percent of the world market.

“As air cargo transports 35 percent of the value of goods traded internationally, the poor cargo performance is bad news for the region and the global economy,” he said.

Calling the US$1.1 billion loss forecast for Asia a nightmare, Bisignani said China’s aviation industry would probably recover faster than other big players like Japan and India.

This was due to the government’s spending which would spur domestic demand as well as the cheap air fares that have led to an increase in domestic flights, he said.

On another note, Bisignani said that airlines needed to manage capacity better and not just focus on market share.

“Market share was a major sin and after September 11, it was a wake-up call,” he said, adding that he expects more capacity cuts by airlines in response to slowing demand.

“We were slow in cutting capacity and it has to be handled in a more efficient way. You see further capacity cuts practically every week in different parts of the world,” Bisignani said. — BERNAMA

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