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Airline losses to shrink this year

Airline losses to shrink this year
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First Published: Thu, Mar 11 2010. 09 50 PM IST
Updated: Thu, Mar 11 2010. 09 50 PM IST
New Delhi: Indian airlines will reduce their losses significantly this calendar year, the International Air Transport Association, or Iata, said in its forecast for the industry on Thursday.
An increase in taxes, however, may hurt the industry, which incurred combined losses of more than $1.5 billion (Rs7,000 crore) in 2009, Iata said.
“We are projecting a growth of 5.1% (in international traffic) for India for this year,” Giovanni Bisignani, director general and chief executive of Iata, said in a conference call from Geneva.
While Iata did not give a projection on actual losses for Indian carriers in 2010, its chief economist, Brian Pearce, said the association expects “significantly reduced losses... Asia-Pacific on the whole will have a net profit of $900 million. You can see the trend.”
The Asia-Pacific region, which includes India, lost $2.7 billion in 2009, according to Iata.
Indian airlines, which make up 2% of global airline traffic, are expected to lose at least $1.5 billion in fiscal 2010, with national carrier Air India’s losses alone projected at Rs5,400 crore.
Globally, Iata expects airlines to lose $2.8 billion in 2010, half the $5.6 billion in losses it had predicted in December for the year. “It’s halfway to full recovery. It’s great news but not yet time to party,” Bisignani said.
For Indian airlines, however, the main concerns would be the new service tax being introduced on air travel as also “pre-financing of airport” infrastructure through development fee such as those levied at the Delhi and Mumbai airports, he added.
“The service tax on international economy (airfares) is a violation of India’s commitment under the Chicago Convention. We are strongly against it,” Bisignani said, adding he would be writing to finance minister Pranab Mukherjee on the matter.
The new service tax of 10% on all classes of domestic and international air travel was announced in the Union Budget. Earlier, the tax was valid only on first class international tickets.
The United Nations-affiliated International Civil Aviation Organization’s resolutions endorse the elimination of taxes on the sale or use of international air transport, an Iata spokesman said.
Geneva: Airline industry group International Air Transport Association (IATA) on Thursday halved its 2010 loss forecast for airlines to $2.8 billion as a recovery led by Asia and Latin America proves stronger than expected.
“For a change today we have some good news to present. The good news is that we’re cutting our loss forecast in half,” said Giovanni Bisignani, director general of IATA.
“You may say it’s still a red number ... it’s probably too early to have a party ... but it’s something very, very positive for the industry and a good signal for the economy.”
Asian carriers are expected to post profit of $900 million in 2010, reversing losses of $2.7 billion in 2009.
“Cargo markets are particularly strong with long-haul cargo capacity for shipments originating in Asia experiencing a capacity shortage. Demand is expected to grow by 12% in 2010,” IATA said.
Latin American airlines are also forecast to record profits of $800 million for a second consecutive year.
With less debt than their European counterparts, Latin American carriers have also benefited from ties with Asia.
“We are seeing a definite two-speed industry. Asia and Latin America are driving the recovery. The weakest international markets are North Atlantic and intra-Europe which have continuously contracted since mid-2008,” said Bisignani.
European airlines will rack up the biggest losses, of $2.2 billion, reflecting the “slow pace of economic recovery and faltering consumer confidence.”
North American carriers will not fare much better, with losses of $1.8 billion, as they face the same problems as their European counterparts.
World airlines suffered their biggest traffic decline since 1945 last year, making 2009 the “worst year the industry has ever seen,” and can expect only a slow recovery overall in 2010, IATA had said.
Passenger demand fell 3.5% in 2009 while in the freight sector demand was down 10.1%.
IATA had been expecting 2010 losses of $5.6 billion.
The association represents about 230 airlines accounting for 93% of scheduled international air traffic but does not include the major budget carriers.
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First Published: Thu, Mar 11 2010. 09 50 PM IST