Airline trade group predicts 2009 loss of $11B for carriers

Global airline losses are headed for a worse-than-expected $11 billion this year and it's not clear when lucrative business travel will rebound to pre-recession levels, a trade group said today.

As recently as June, the International Air Transport Association had expected airlines to lose $9 billion this year. But airlines lost $6 billion in the first half alone. They're still suffering from persistently high fuel prices, weak demand, and falling fares.

Jennifer Brown/The Star-LedgerPlanes at Newark Liberty Airport in this 2008 file photo. Airlines are expecting more than $11 billion in losses this year, a trade group said today.

Airlines have struggled to fill seats -- especially the profitable ones at the front of the plane, and last-minute business travelers who pay more. Demand for business and first-class seats has dropped 20 percent, compared with a 5 percent drop in coach.

The amount passengers will pay to travel is expected to fall 12 percent this year.

"When yields fall, they almost never recover," said Giovanni Bisignani, IATA's director general and CEO, speaking at a news conference in Washington.

Because of the recession, airlines are losing more money in 2008-2009 than they lost in 2001-2002 after the Sept. 11 attacks, Bisignani said. After Sept. 11, it took more than three years for airline revenues to recover -- and that was in a much smaller recession, he said.

"This could be a long-lasting structural change," he said. "Even with better volumes we don't see industry revenues returning to 2008 levels until 2012, 2013 at the earliest."

IATA predicted a 2010 loss of $3.8 billion, and said it doesn't expect the industry to turn a profit until 2011 at the earliest.

Bisignani said they are starting to see the beginnings of an economic recovery, especially in Asia. That's helping to stem the declines in travelers and freight. But passengers are paying less to travel than they used to, and oil prices have risen. The air transport group said those factors are more than offsetting economic growth.

"Unfortunately the prices of fuel are increasing, anticipating a recovery that we do not see in our business," Bisignani said.

Cargo is no better. Freight haulers have taken 227 cargo freighters out of the fleet. But remaining freighters are flying only half full, IATA said. Delta Air Lines Inc. has said it will ground its fleet of 14 747 freighters by the end of this year, although Delta and other carriers also haul cargo in the bellies of their passenger jets.

The amount of cargo shipped in July fell 11.3 percent compared to the year before. Still, that was better than the 23.2 percent dropoff in June.

"This is a sign that the global economy is starting to work, but it's weak, and it's fragile," Bisignani said.

Bisignani said airlines aren't looking for government bailouts, but they do need action to make it possible to turn a profit, he said. He called on airports to cut fees, and praised a 25 percent reduction in charges to operate at Singapore, and 50 percent in Malaysia. He said he's concerned that John F. Kennedy and Newark Liberty airports, meanwhile, "could soon become the most expensive airports in the world."

The Port Authority of New York and New Jersey, which runs both airports, responded with a statement saying, "Airlines regularly seek to enter this market and those who already serve the region often look for ways to expand."