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06.02.2009 Business & Finance

Airline industry loses $2.5bn

By myjoyonline

The International Air Transport Association (IATA) has disclosed that the airline industry has registered a $5 billion loss in 2008, adding that for 2009, various airlines would further lose $2.5 billion based on a fuel price of $60 per barrel.

It stated that there would be a decline of 3.0 percent in passenger volumes, and a drop of 5.0 percent in cargo traffic, while yield would be in deterioration of 3.0 percent.

Industry revenues are also expected to contract by $35 billion from $536 billion in 2008 to $501 billion in 2009, IATA said.

According to the Director General and Chief Executive Officer, Giovanni Bisignani, "2009 is shaping up to be one of the toughest years ever for international aviation. The 22.6 percent drop in international cargo traffic in December puts us in un-charted territory and the bottom is nowhere in sight”.

He stated that in the face of this economic crisis, IATA is calling for major structural changes to the industry.

"We don't want bail-outs. But we need to change the ownership rules. Almost every other business has the freedom to access to global capital and the ability to merge across borders where it makes sense. To manage in this crisis, airlines need the same management tools," Bisignani stated.

In the release of its traffic result for December, global international cargo traffic plummeted by 22.6 percent compared to the December 2007.

The same comparison for international passenger traffic showed a 4.6 percent drop. The international load factor stood at 73.8 percent.

However, he noted that for the full-year 2008, international cargo traffic was down 4.0 percent, while passenger traffic showed a modest increase of 1.6 percent, and the international load factor stood at 75.9 percent.

"The 22.6 percent free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9 percent. Air cargo carries 35 percent of the value of goods traded internationally," Bisignani noted.

The IATA boss explained that the 4.6 percent decline in December passenger demand was less dramatic than the fall in cargo. He added that 1.5 percent cutback in supply could not keep pace with falling demand, resulting in a 2.4 percent decline in the December load factor to 73.8 percent.

Furthermore, Bisignani said African carriers have continued to see their traffic fall, despite more robust economies and travel to the continent than other regions.

"Airlines are struggling to match capacity with fast-falling demand. Until this comes into balance, even the sharp fall in fuel prices cannot save the industry from drowning in red ink," said Bisignani.

He added, "Yields are also under attack with a sharp drop in November premium traffic. For November, IATA reported an 11.5 percent drop in the number of premium tickets issued globally".

The collapse in the airline industry's freight business, IATA stated was a reflection of 20-30 percent decline in export and import volumes being reported across Asia, North America and Europe as the global recession plumbs new depths in December.