Swine flu, rising fuel cost to hurt airlines more, says Iata CEO

Swine flu, rising fuel cost to hurt airlines more, says Iata CEO
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First Published: Thu, Jun 04 2009. 09 12 PM IST
Updated: Thu, Jun 04 2009. 09 12 PM IST
Kuala Lumpur: Airline losses worldwide this year will be wider than expected as the global recession saps demand for travel and business-class fares, the International Air Transport Association (Iata) said.
The group’s new industry forecast for 2009, to be announced on 8 June, will be “substantially worse” than the March estimate of losses of $4.7 billion (Rs22,184 crore now), Iata chief executive officer Giovanni Bisignani said in Kuala Lumpur on Thursday.
“The economy isn’t moving forward despite some optimism in the financial market,” he said in the Malaysian capital, where Iata will hold its annual meeting next week. “The industry is still in a difficult situation. Premium traffic hasn’t improved.”
Airlines, which Iata says lost as much as $8.5 billion in 2008, are shedding jobs, cutting routes and grounding planes to survive a global slowdown that has pushed British Airways Plc., Hong Kong’s Cathay Pacific Airways Ltd and Japan Airlines Corp. to losses. Cargo demand, the clearest way to gauge the effect of a slowing economy, also hasn’t improved, Bisignani said on Thursday.
“The global economy hasn’t started to recover, while more bad things like swine flu are spreading,” said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. “Meanwhile, oil has started to rise again.” Airlines “are already very weak”.
Jet fuel, most airlines’ biggest cost, tracks crude oil prices, which have climbed to about $66 a barrel after falling to as low as $32.4 on 19 December. The swine flu virus has spread to 66 countries since April, the same month the International Monetary Fund said the global economy will shrink 1.3% in 2009, rather than expand.
Still, Bisignani said he expects the flu to have a “limited” effect on travel because the World Health Organization hasn’t called for travel restrictions.
Iata’s 230 members account for 93% of scheduled international air traffic. Bisignani reiterated that the industry may not recover until 2011.
“It’s difficult to imagine” profits for the airline industry in the next “couple of years”, he said.
The global decline in air travel slowed for the first time in seven months in April as declines in European and North America markets eased, Iata said on 27 May.
April figures were boosted by leisure travel related to the Easter holiday, which fell in March in 2008, Iata said. The global outbreak of swine flu came in the last week of the month and had little impact on April figures, Iata said.
Irene Shen in Shanghai and Andrea Rothman in Toulouse, France, contributed to thisstory.
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First Published: Thu, Jun 04 2009. 09 12 PM IST
More Topics: Swine flu | Fuel | Costs | Airlines | Iata |