ICAO expecting $2.7 billion industry loss for 2008

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ICAO is forecasting that its member states' airlines will post a $2.7 billion operating loss for 2008, although it anticipates a return to profitability in 2009-10.

Despite the bleak financial climate, ICAO is expecting its member states to post a $3.8 billion profit in 2009 - a figure which it says will grow to $6.7 billion by 2010. But this year it is predicting that factors including high fuel prices will drive the industry to a $2.7 billion operating loss, even after fuel surcharges and capacity adjustments.

ICAO believes that the rate of passenger traffic growth will "decelerate markedly" in 2009 to 0.9 %, but it adds that this will recover in 2010 with a 5.1% increase. Passenger load factors are expected to follow suit, dipping from 76.6% in 2007 to around 76% in 2008 and 2009, before returning to 2007 levels in 2010.

"The return to high rates of traffic growth will be influenced heavily by how quickly the world emerges from the financial crisis and the ultimate impact of the crisis on economic rates of growth," says the organisation. "Overall, the traffic outlook is poor for the North American region, while it is more robust for the Middle Eastern, African and Latin American regions."

In 2008 ICAO says passenger traffic levels grew by only 1.8%. It refers to this as a "significant drop" in growth compared with previous years. Scheduled passenger numbers rose by around 0.8% to 2.3 billion and cargo grew 1.1% to reach 41.9 million tonnes, sharply down from 3.9% growth in 2007.

It notes that non-IATA carriers, such as budget airlines, stepped up their market share considerably, reaching 33% of domestic scheduled traffic and around 20% of total scheduled traffic.

International passenger traffic growth slowed from 7.6% to 4.1% and notably Asia Pacific, which accounts for a sizeable 27% of international traffic, achieved near-zero growth. This compares with 8.9% growth in the Middle East, 7.2% in Latin America, 5.3% in North America, 5.2% in Europe and 2.1% in Africa.

Domestic growth is expected to be 1.6% in 2008, down from 6.2% in 2007, dampened by a 3.1% decline on the North American market which accounts for nearly 58% of domestic traffic.

ICAO says: "In the first half of 2008, air travel demand was affected by higher fuel and commodity prices, leading to increased air fares and a decline in consumer discretionary spending on such items as leisure travel.

"The trend was amplified by the fallout from the global financial crisis in the second half of the year, hitting severely the performance of the Western developed countries as well as emerging economies in Asia Pacific. The slowdown was also experienced in the Middle East, which nevertheless benefited from the boom in oil prices for most of 2008."