Global Airlines Expected to Post Over $5 Billion in Losses This Year

by: Ron Haruni

The International Air Transport Association [IATA] expects global airlines to post a combined loss of $5.2 billion in 2008. IATA also predicts the continuation of the industry’s weak performance into fiscal 2009 - where projections, in terms of net losses, will reach $4.1 billion. The association cites the high and increasing cost of fuel as the main cause of the decline in profitability.

During the second quarter of this year airline expectations for profitability fell to new lows, which also lead the group’s latest projections to include a revised down forecast for traffic growth this year and next, in response to the weaker economic outlook. For 2008 traffic volume, growth has been reduced from 3.9% to 2.8%, and for 2009 from growth of 4.5% down to just 2.9%. Based on these numbers, North American carriers are most likely to be the hardest hit with expected losses of $5 billion in 2008.

European airlines are struggling as well; posting only $300 million in profits from $2.1 billion in 2007. Similarly, Asia-Pacific carriers are expected to see profits shrink to $300 million from almost $1 billion last year, while Middle East will post $200 million in profits versus $300 million in 2007.

However, while recognizing the fact that the demand environment has become tougher in recent months, the airline industry still remains confident as oil prices ease, that demand volumes will at some point improve and slowly start to increase.