Geneva / London: Airline industry losses in 2009 may shrink to half this year’s level as a decline in fuel costs more than makes up for a reduction in the number of people flying.
Carriers may lose a total of $2.5 billion (Rs12,300 crore) next year, compared with $5 billion in the current 12 months, the International Air Transport Association (Iata) said on Tuesday in a press briefing in Geneva, where the trade body is based.
Iata had predicted a $4.1 billion loss for airlines in 2009 as recently as 3 September, based on an average oil price of $110 a?barrel.?With crude on Tuesday trading at $43.46 and Iata estimating a price of $60 next year, costs have eased for those carriers that were hardest hit in 2008 after struggling to secure hedging positions.
The improvement is due to an extraordinary situation for North American carriers, Iata chief executive officer Giovanni Bisignani said. With very little hedging, they were hit with the full impact of high fuel. To cope, they cut capacity early and are now benefiting from the full impact of low spot prices. The predicted loss of $5 billion for 2008 is also lower than the previous estimate of $5.2 billion, which assumed an average oil price of $113 a barrel. During the year, the loss projected by Iata has ranged as high as $6.1 billion in a worst-case scenario.
While Iata’s loss estimates have eased, the industry group now forecasts that international traffic may decline 3% next year, the first drop since 2001, after earlier predicting a 2.9% increase. “The situation is clearly an awful lot better than when oil was at $147 a barrel,” said Nick Cunningham, an analyst at London-based Evolution Securities Ltd, referring to the record price for crude reached on 11 July. “However, the macroeconomic situation is dreadful and traffic is dropping very, very fast.”
Bisignani said 2009 would still be another gloomy year. North American carriers, likely to suffer a combined loss of $3.9 billion in 2008, will next year post a profit of about $300 million, still less than 1% of revenue, he said.