Airline losses grow

MONTREAL — The airline industry says it will not turn a profit until after 2011, comparing its current woes to the economic devastation wreaked by the 9-11 terrorist attacks.

MONTREAL — The airline industry says it will not turn a profit until after 2011, comparing its current woes to the economic devastation wreaked by the 9-11 terrorist attacks.

The International Air Transport Association, a Montreal-based association of airlines, painted a grim picture Tuesday of an industry in crisis caused by low demand and higher-than-expected fuel prices.

CEO Giovanni Bisignani said expected losses in 2009 would be $US2 billion worse than previously forecast, with total projected losses of $11 billion in 2009 and $3.8 billion next year.

One industry-watcher doesn’t expect any real improvement for Canada’s airlines until the economic recovery takes hold. Canadian aerospace analyst Cameron Doerksen says there do appear to be some signs of economic stability.

“That’s not to say that things are rebounding for Canadian airlines — but they’re not getting worse,” he added.

“But at the end of the day, for the airlines in Canada, as is true for most airlines, it’s really an economic recovery that’s going to drive their results and drive a rebound.”

IATA compares the current climate to 9-11.

Bisignani said the combined projected losses for this year and 2008 would be US$27.8 billion — bigger than for 2001 and 2002. Losses for 2001-02 were US$24.3 billion, as the Sept. 11, 2001, terrorist attacks triggered a precipitous drop in air travel.

“Combining last year and this year, losses are $27.8 billion and that is larger than . . . after Sept. 11,” Bisignani said.

“This industry is in a massive crisis. . . The global economic storm may be abating, but airlines have not yet found safe harbor.”

The formula used by IATA includes the full 2001 and 2002 calendar years, meaning it excludes the impact of the terrorist attacks from eight months out of the 24-month sample. The economy had already started slowing down earlier in 2001, causing some weakness in the airline sector before the attacks.

The market meltown of 2008, which sparked the worst period of the current recession, also arrived late in the year. Bisignani said revenues for 2009 will be US$80 billion below last year’s levels.

Passenger and cargo revenues are expected to fall in 2009, led by a 20 per cent drop in demand for business travel. Passenger traffic is also expected to decline by four per cent, and cargo by 24 per cent, for 2009.

IATA says the situation is being made worse by the rising cost of fuel. Spot oil prices have been driven up sharply in anticipation of improved economic conditions.

The air association says the world’s airlines, as a whole, last turned a profit of US$3.7 billion in 2000.

IATA, which represents 230 companies including Air Canada, doesn’t expect profits until after 2011 — at the earliest.

“Revenues are not likely to return to 2008 levels until 2012 at the earliest,” Bisignani added.

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