Airlines march to predicted IATA losses as fuel prices rise

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Financial struggles of global airlines are continuing as IATA says market concerns are rising over increasing fuel costs and declining yields, adding further pressure to airline cash flows.

IATA estimates that oil and jet fuel prices have increased more than 30% or $20 a barrel since early May, after net losses at global carriers during the first quarter reached $3 billion. Those losses are "consistent with our forecast for 2009 total net losses of $9 billion", the association declares.

Falling revenues triggered most of the profit erosion in the first quarter as yields continued to decline. IATA warns that yields have continued to slide during the last couple of months as excess capacity remains in the marketplace.

Even as global airline capacity in May fell 5%, "capacity cuts so far this year in both passenger and freight markets have been roughly half the decline in volumes flown", IATA explains.

Overall freight capacity reductions from both widebody passenger aircraft and freighters, and the stabilisation of air freight demand kept freight load factors broadly unchanged in April and May. IATA says utilisation typically declines during that two-month period.

The association believes air freight volumes have been stable since hitting a low point in December, with a moderate rise occurring in May largely due to an expansion of inventories in anticipation of an economic recovery. Yet the association warns: "A significant recovery is not yet visible."

Carriers continue to take deliveries of new aircraft, but IATA says the pace of carriers accepting new aircraft moderated in May to 96. But since older aircraft are not being retired or taken out of service the overall airline fleet is expanding, despite continuing efforts to cut capacity.