Airlines see turnaround in 2010; more job losses feared

Airlines see turnaround in 2010; more job losses feared

Kuala Lumpur: Airline executives on Tuesday expressed hope of a turnaround next year after fresh estimates showed that they may lose close to $20 billion from 2008 to 2009 due to the global economic slowdown.

With oil prices threatening to rise on expectations of a US-led economic turnaround, delegates to the annual meeting of the International Air Transport Association (IATA) said some carriers may start making money in late 2010.

“In our view, we see recovery towards end of 2010. We think recovery will start there," said Alan Joyce, chief executive of Australia’s Qantas Airways Ltd.

“Our regional operations are holding well. Our long-haul is losing money," he told fellow members of IATA, which represents 230 airlines accounting for 93% of scheduled international air traffic.

“The Japanese market is particularly weak. Swine flu is having an impact," said Joyce.

IATA chief economist Brian Pearce said that the Asia-Pacific region, forecast to lose $3.3 billion or over a third of 2009 industry losses, may see a recovery in 2010 with Europe lagging other regions.

He said that government spending to stimulate consumption would help airlines.

“The US and North American markets will come out earlier than Europe," he said.

Pearce said: “During this stormy period, airlines would love to merge but restraints on ownership will prevent it."

“You will see alliances and coordinations by airlines to cut costs," he added.

Tony Tyler, chief executive of Cathay Pacific Airways Ltd, said: “Let’s not forget when we recover we are recovering from a very bad base, and it will be some time before we are back to where we were."

“I’m afraid we are in for a long haul. We are not going to see instant recovery," he said.

“Thai Airways International PCL is considering a combination of issuing debt and shares to boost its capital by 60 billion baht ($1.75 billion) in the next 12 to 18 months," executive board chairman Wallop Bhukkanasut said.

“Issuing bonds is one of the options, but we are also considering a share offering," he said.

SAS Group said it may cut more jobs if market conditions worsen.

“Not now. But if the market conditions are going to be even worse, then it could be possible to take new actions," SAS Group president and chief executive Mats Jannson said.

SAS Group has cut about 9,000 jobs as part of its efforts to fight the current economic downturn.

IATA director general Giovanni Bisignani told delegates on Monday that the industry may lose $9 billion in 2009, almost double an estimate made just three months ago, making the crisis worse than the aftermath of the 11 September, 2001 attacks on the US.

Combined with a revised estimate that it lost $10.4 billion in 2008, the industry now looks set to lose almost $20 billion over two years.

Bisignani also warned against the possibility of a new oil price hike.

“The risk that we have seen in recent weeks is that even the slightest glimmer of economic hope sends oil prices higher. Greedy speculation must not hold the global economy hostage," he said.

IATA says that the industry’s fuel bill is forecast to decline by $59 billion to $106 billion in 2009 based on an average price of $56 per barrel for Brent North Sea crude during the year.

On Tuesday, the Brent contract for July was above $68, nearly double the level in December when oil prices hit bottom.

The price of New York light sweet crude, the global benchmark, also held above $68 a barrel Tuesday after rebounding from overnight falls.

It had fallen toward $32 a barrel last December from a peak of $147 in July.