An already bleak picture for industry losses painted by IATA earlier this year has grown worse as fuel prices start to climb again and yields remain stubbornly depressed. The association has widened its forecast for 2009 from projected losses of $9 billion to a bloodshed of $11 billion.Coupled with losses last year of $16.8 billion, carriers for 2008-2009 are projected to lose a huge $27.8 billion, more than the combined losses for 2001-2002 of $24.3 billion.
Despite some signs of the "global economic storm abating", IATA director general Giovanni Bisignani warns: "We are in intensive care. The crisis is not over." IATA projects revenues for global carriers in 2009 will plummet 15%, or $80 billion, to $455 billion.IATA acknowledges that while the beginnings of an economic upturn are now visible, "particularly in Asia, to the benefit of travel and frieght volumes, yields are much weaker than anticipated", and oil prices are higher. "These last two factors are more than offsetting economic growth."
Pointing to the 20% plummet in premium passenger yields, Bisignani stresses IATA has never witnessed such a dramatic drop in its 65-year history.
Airlines face challenges in attempting to recoup the degradation in yields as Bisignani believes "yields are easily depressed but never fully recover". During the economic boom in 2004 yields still remained 7% below 2001 levels, he explains.
Despite aggressive capacity cuts by US carriers Bisignani says "the global situation is a worry".Globally airlines have achieved a larger number of capacity adjustments by "using aircraft less efficiently". The global fleet in 2009 has actually grown by 2% or 500 aircraft.Moreover, "a desperate cash situation in the short-term could tempt airlines to add capacity at the expense of further depressing yields and deepening losses," he warns.
Although current estimates from IATA show losses by global airlines shrinking to $3.8 billion in 2010, average oil prices per barrel are likely to steadily rise from an average of $61 per barrel this year to $72 next year, "further squeezing airline cash flows", the association warns.
Bisginani's recommended measures to alleviate these dramatic circumstances is similar to what most airline executives trumpet: manage capacity and costs while conserving cash. But he also stresses all industry stakeholders including airports, air navigation providers and global distribution systems need to play their part and cut costs too.
As he congratulates some airports for lowering their various charges he warns that New York JFK and Newark airports "could soon become the most expensive in the world, That's not a good record to achieve today."
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