IATA Warns Industry To Suffer USD9bn Losses

by Ulrika Lomas, Tax-News.com, Brussels

09 June 2009

The International Air Transport Association (IATA) has revised its airline financial forecast for 2009 to a global loss of USD9bn. This is nearly double the association’s March estimate of a USD4.7bn loss, reflecting a rapidly deteriorating revenue environment. IATA also revised its loss estimate for 2008 to USD10.4bn from the previous estimate of USD8.5bn.

“There is no modern precedent for today’s economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced. After September 11, revenues fell by 7%. It took three years to recover lost ground, even on the back of a strong economy. This time we face a 15% drop — a loss of revenues of USD80bn — in the middle of a global recession. Our future depends on a drastic reshaping by partners, governments and industry. We cannot bear the cost of government micro-regulation, crazy taxation and partners abusing their monopoly power,” said Giovanni Bisignani, IATA’s Director General in an address to 500 of the industry’s top leaders gathered in Kuala Lumpur for the 65th IATA Annual General Meeting and World Air Transport Summit.

Bisignani noted that the recession is the most significant factor impacting the industry’s bottom line. IATA’s revised forecast sees revenues declining an unprecedented 15% (USD80bn) from USD528bn in 2008 to USD448bn in 2009.

IATA’s research shows that air cargo demand is expected to decline by 17%. In 2009, airlines are forecast to carry 33.3 million tonnes of freight, compared to 40.1 million tonnes in 2008. Passenger demand is expected to contract by 8% to 2.06 billion travelers compared to 2.24 billion in 2008. The revenue impact of falling demand will be further exaggerated by large falls in yields — 11% for cargo and 7% for passenger.

The industry crisis is making liberalization even more critical, urges IATA. “We cannot manage in these unprecedented times with one hand tied behind our back. Airlines need the same commercial freedoms that every other industry takes for granted — access to global markets and capital,” said Bisignani.

In a similar vein, Bisignani urged governments to avoid protectionist policies as they stimulate economies. “The forces of de-globalization are gathering strength. World trade is already suffering with a 15% downturn. Protectionism is the enemy of global prosperity. In the 1930s, it prolonged the recession. And it will not work today. To build a strong global economy, we must fight hard to keep the world trading,” concluded Bisignani.

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