Grim Prospects For The Airline Industry In 2009

Geneva,Switzerland-based The International Air Transport Association (IATA) announced a revised outlook for the airline industry in 2009. Due to the worsening economic conditions worldwide, IATA increased the global loss outlook from $2.5B in December to $4.7B now.

Some of the key points from the news release are:

  • Air Cargo demand is to decline 13% this year
  • Passenger traffic is expected to contract by 5.7% over last year
  • Asian carriers are going to the worst hit with a fall of nearly 7% in demand
  • To and from traffic to China and India will decline
  • North American carriers are expected to report a profit in 2009 due to careful capacity management and lower jet fuel prices
  • European demand will fall by nearly 7%
  • Demand in Latin America is projected to fall by 7.8%
  • Middle East is the only region that is projected to have a positive growth this year

Giovanni Bisignani, IATA’s Director General and CEO said:

“Fuel is the only good news. But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care. Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand,”

The above statement is an excellent depiction of the current state of the airline industry.

Some of the airline ADRs are:

TAM(TAM) and Gol Linhas Aereas Intelligentes(GOL) of Brazil

RyanAir (RYAYY) of Ireland

China Eastern (CEA) and China Southern Airline(ZNH) of China

Lan Airlines (LFL) of Chile

Many of the US carriers such as Delta (DAL), Continental (CAL), Southwest (LUV) may perform better than their peers in other countries. However they will also be impacted adversely due to the slowing economy. Consumers will cut down on unnecessary travel while business travelers will use other means of communication such as video conferencing.

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