Airlines expected to lose $5.6 billion in 2010

AP News
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Posted: Dec 15, 2009 5:43 AM

The global airline industry will face another harrowing year in 2010, with losses expected to reach $5.6 billion despite some recovery in passenger and cargo traffic, an industry group said Tuesday.

Low yields and rising costs are a "continuing disaster" for world airlines, who have already lost $49 billion since 2000, according to the International Air Transport Association. The industry group maintained its estimate of $11 billion full-year losses for 2009.

"The worst is likely behind us," said IATA chief executive Giovanni Bisignani. "Some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs."

Still, he conceded that "airlines will remain firmly in the red in 2010."

IATA attributed much of the pressure on the "extraordinarily low" yields airlines are currently generating _ the average price someone pays to fly one mile. Those will barely improve in 2010 because of a glut of planes on the market and lower corporate travel budgets, it said.

The group, which represents 240 airline companies worldwide, has been forced to lower its forecasts as the intensity and longevity of the economic crisis became clearer. It had earlier forecast $3.8 billion in losses for 2010, and only 12 months ago was predicting that deep cost cuts by U.S. carriers would limit industry losses to $2.5 billion for this year.

"2009 very quickly got much worse than we expected," said IATA chief economist Brian Pearce.

Passenger traffic fell 4.1 percent, from the already-low levels they reached in 2008 when financial markets collapsed, and premium fares fell the hardest. Cargo traffic, meanwhile, declined 13 percent.

The U.S. carriers that were being counted on to lead the industry toward recovery also struggled, losing an estimated $2.9 billion in 2009. European airlines and Asia-Pacific carriers both lost around $3.5 billion, while the Middle East fared somewhat better, with a negative result of $1.2 billion.

Latin America was the only region in the black in 2009, and is expected to be the sole profit-maker again next year.

IATA said it expects passenger traffic to bounce back by 4.5 percent in 2010, with nearly 2.3 billion people traveling. Cargo demand will perk up by 7 percent, but remain significantly below the peak traffic of 41.8 million tons in 2007.

Bisignani said 2010 will look similar to 2007 in terms of passenger traffic and an oil price of around $75 a barrel. But revenues will be $30 billion less next year than in 2007, and "change is needed," he said.

He urged airlines to focus on the traditional solutions of conserving cash and cutting costs, while governments should cut taxes.

After 30 airlines were eliminated in 2009, Bisignani said the big carriers were healthier now as a result of $38 billion in cash they have raised this year. Still, carrier debts total $220 billion and regional carriers may be in trouble.

"I don't see the threat of major bankruptcies, but smaller airlines (will) have difficulty accessing credit," he said. "As a result, they are fragile."

Beyond the airline data, Bisignani also launched a surprisingly sharp criticism of the British government for raising taxes on emissions with the purported goal of halting global warming. The higher charges are robbing carriers of the money they need to invest in cleaner technologies to fulfill an industry pledge to halve carbon emissions by 2050, he said.

"The U.K. is the worst tax offender," Bisignani told reporters. "Now the government admits that it is just a tax to pay bankers' bonuses, completely unrelated to the environment."