IATA is now forecasting a $9 billion global loss for 2009, doubling its $4.7 billion prediction just three months ago. The freight and passenger traffic collapse means revenues for 2009 will fall $80 billion (15%) to $448 billion.
"We may start to see a recovery in freight in the second half, but for the passenger recovery we will have to wait for next year," said Giovanni Bisignani, director general of IATA. The body's first quarter figures showa 35-40% fall in premium revenues. Greater losses seem inevitable.
Predicting how fast the recovery will run is a tough call. "Looking at history - and reviewing what happened after 9/11 - it took three years [for the industry to recover]," he said. But Bisignani notedthe industry is structurally different this time, potentially shortening the timelines.
Bisignani recalled the words of Delta's Leo Mullin and JAL's Isao Kaneko, shortly after he took over IATA's reins. "They told me the worst is over!" he exclaimed. "When we started to see a bit of blue skies,[in 2003] along came SARS - the second shock." Then last year fuel skyrocketed to over $140 a barrel, with some forecasters saying it could go even higher. "$200 a barrel would have been a catastrophe. We can handle increases in fuel when there is an increasing economy," he said.
FUEL PRICE SPIKE
Not all agree $200 a barrel would have been so bad, if it meant some weak players failing. "I was disappointed to see the price come down," said Air New Zealand chief Rob Fyfe. "I'm serious. I thought $200 oil would've been good, as it would clean out some of the marginal price [players]."
However, fuel prices fell as the recession began to bite. But this crisis is different as the effects are global. "In the past the crisis was localised, but the difference was a growing economy and we recovered very quickly," said Bisignani. "Now we are in economic meltdown and in survival mode." Despite labelling himself as an optimist, Bisignani is also realistic. "Where are the numbers that are positive?" he said. "Yields and traffic are still going down."
Something perplexing him is the recent fuel price rise from around $40 a barrel to nearly $70. "Fuel is increasing on an optimism that is not related to the numbers. The last thing carriers need is fuel at $70."
IATA was tasked with minimising the risk to airlines from banking failures after the 2008 AGM in Istanbul. In the second half of 2008 it also did a careful examination, "stress testing those airlines at risk around the world". It has contingency plans if a major carrier does fail, but these have not been needed yet. "We have seen many small- and medium-sized carriers go out of business," said Bisignani. The last one suspended from IATA's financial system was Africa's Air Senegal. It stopped operations in April.
Larger carriers have beenbolstering their balance sheets. "Their cash position in this last period is not so desperately bad," he said. "There have been a lot of sales and leasebacks [of aircraft] as airlines prepare themselves for a tough winter. The problem is what will happen in the fall. Let's hope this [market] optimism gets translated into numbers."
One bright spot is China, where a national stimulus package has helped boost the economy and kept traffic growing in recent months, said Bisignani.
At last year's AGM, Bisignani had stern words for governments and monopoly suppliers. IATA is still calling forgreater operational freedom, notably the removal of the bilateral air services regime. "When we ask a simple question some are still struggling to find a way forward," he said.
However, IATA's Agenda for Freedom is yielding "some positive signs" on liberalisation. The technical support is there and must now be translated into political support,said Bisignani. There are also optimistic signs from the new US administration. In terms of suppliers, hesaidsome people "get it", but "there is still a group of people living in the old times," he says.
Source: Airline Business
