Airline losses likely to be bigger than expected

Airline losses will be wider than expected this year as the global recession saps demand for air travel, the International Air Transport Association (IATA) said.

The group's new industry forecast for 2009, to be announced on June 8, will be "substantially worse" than the March estimate of losses of $4.7 billion, IATA chief Giovanni Bisignani said yesterday in Kuala Lumpur, reported Bloomberg.

"The economy isn't moving forward despite some optimism in the financial market," he said. "The industry is still in a difficult situation. Premium traffic hasn't improved."

Airlines, which according to IATA lost as much as $8.5 billion in 2008, are eliminating jobs, cutting routes and grounding planes to survive a slowdown that has pushed some of the world’s largest airlines to losses.

Cargo demand, the clearest way to gauge the effect of a slowing economy, has not improved either, Bisignani said.

"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 in Shanghai. "Meanwhile, oil has started to rise again. Airlines are already very weak."

Crude oil prices, which have climbed to about $67 a barrel after falling to as low as $32.40 on December 19 last year are affecting airlines through the cost of fuel again.

"It's difficult to imagine" profits for the airline industry in the next "couple of years," he said.