Recession single biggest threat to airline industry: IATA

Geneva
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Lengthy global recession has replaced record high oil prices as the single biggest challenge facing the airline industry, says IATA, and no region will escape unscathed.

Speaking at the organisation's annual global media day in Geneva, IATA chief economist Brian Pearce said the current turmoil in the banking sector and the housing markets would be "driving the outlook". This outlook from IATA includes a $5 billion loss for the industry in 2008, followed by a $2.5 billion loss in 2009.

While the price of oil has dropped back significantly from the peaks seen over the summer, the airline industry faces an "unprecedented weakness in revenue and air travel", which will wipe out any benefits from the fallback in fuel prices.

Hedges put in place earlier this year have carried over to the second half for many airlines, with the exception of those in the USA which were unable to hedge to the same extent as their counterparts in other regions.

Ironically, US carriers - left smarting from high oil prices - are in the best position going into 2009 because they have already slashed capacity, says Pearce.

But he says: "In the USA there is a big need to replace the fleet and a very big financing need for new aircraft. But because of the credit crunch it is getting increasingly difficult to finance new aircraft."

IATA director general Giovanni Bisignani says 2009 will be a "very difficult year for airlines", with revenues expected to fall much more dramatically than they did in the downturn following September 2001.

He expects industry revenues to fall from $536 billion in 2008 to $500 billion in 2009. By contrast, revenues in 2002 fell by just $1 billion, to $306 billion, from the previous year. "This is a global recession that we've never had in aviation, says Bisignani.