Iata revises loss forecast for Middle East aviation

The International Air Transport Association (Iata) has drastically revised its 2009 financial forecast for Middle East as it expects the region’s carriers to lose a total of $500 million from an earlier figure of $1.5 billion.

In a statement released on Tuesday, the aviation agency attributed the improved outlook to the Middle East carriers’ long-haul market share with expanded capacity and hub connectivity.

Iata, however, admitted that the “weakness of economic recovery” could still pose a threat to regional airlines’ profit margins.

Globally, Iata expects losses to amount $11 billion in 2009, which is $2bn worse that the previously projected $9 billion due to rising oil prices and weak yields. It also reported that industry revenues for the year are expected to fall by 15 per cent or $80bn to $455bn compared with 2008 levels.

Giovanni Bisignani, Iata’s director general and CEO, says the bottom line of the crisis is larger than the impact of 9/11.

“This is not a short-term shock [as] $80bn will disappear from the industry’s top line. That 15 per cent of lost revenue will take years to recover. Conserving cash, careful capacity management and cutting costs are the keys to survival. The global economic storm may be abating, but airlines have not yet found safe harbour. The crisis continues,” Bisignani said.

Iata mentioned in its report that dwindling passenger demand and yield, as well as rising fuel prices are the main factors that influence the expected revenue losses for airlines.

Passenger traffic is anticipated to decline by 4 per cent and cargo by 14 per cent in 2009 while yields are expected to fall 12 per cent for passenger and 15 per cent for cargo. The fall in passenger yield will be led by a 20-per-cent drop in demand for premium travel, the agency said.

Speculations of an imminent global economic recovery have led to a spike in oil prices, a factor that will also stifle any improvement in global aviation.

“Oil is now expected to average $61 per barrel (Brent) for the year (up from $56 per barrel in the June forecast). This will add $9bn in cost for a total expected fuel bill of $115bn,” the Iata report said.

Bisignani added that the crisis does not involve airlines alone.

“All our business partners — including airports, air navigation service providers, global distribution systems — must be prepared to cut costs and improve efficiencies. Some airports have delivered cost reductions, but not in line with the magnitude of the changes to the industry cash flow,” he said.

Governments, Bisignani said, need a wake-up call to create a policy framework that supports a competitive air transport sector capable of driving economic expansion.