‘Impact of recession worse than 9/11’

Airlines across the world continue to reel from the global economic downturn with losses now estimated at more than $27 billion. “The bottom line of this crisis – with combined losses for 2008 and 2009 at US$27 billion – is larger than the impact of 9/11,” said Giovanni Bisignani, director general and CEO of the International Air Transport Association (Iata). “This is not a short-term shock. US$80 billion will disappear from the industry’s top line. That 15% of lost revenue will take years to recover.” Airlines suffered major losses following 9/11, which saw passenger figures drop drastically. “But it was only for three months and at a time when the economy was growing. Even then it took airlines three years to recover. And this crisis has been worse,” said Bisignani. “We do not expect revenues to result in any profitability before at least 2012, even only 2013.” Iata revised its global financial forecast for the second half of the year predicting airline losses for 2009 to total around $11 billion – $2 billion worse than the previously projected loss of $9 billion. Industry revenues are expected to fall by $80 billion (15%) to $455 billion compared with 2008 levels. According to Bisignani, three major factors are driving the expected losses. These include demand that continues to decline; yield that is expected to fall at least 12% for passengers and 15% for cargo as well as the cost of fuel. “The optimism in the global economy has seen passenger and freight volumes rise, but that is the only bright spot,” said Bisignani. “Rising costs and falling yields have squeezed airline cash flows. The sharp decline in yields will leave a lasting mark on the industry’s structure.”