Airlines to Lose $5.2 billion in 2008?

The International Air Transport Association (IATA) is predicting that airlines worldwide will lose $5.2 billion in 2008, due to slowing demand and the high price of oil. Aviation fuel is expected to rise to 36% of operating costs by the end of 2008– it was only 13% in 2002.
Traffic data for July showed a continued slowing of demand. July year-on-year passenger demand growth fell to 1.9% – the lowest in five years – while capacity increased by 3.8%. This resulted in a drop of 1% in average load factor to 79.9% compared to July 2007.
As a result of the weaker economic outlook, IATA has revised its traffic forecast for the combined domestic and international markets. Passenger traffic is now expected to grow on average by 3.2% (from 3.9%) and air freight by just 1.8% (from 3.9%). This is only half the pace of expansion seen in 2007 despite being boosted by the stronger growth seen at the start of the year.
“This crisis is re-shaping the industry in more severe ways than the demand shocks of the Severe Acute Respiratory Syndrome outbreak or the effects of September 11, 2001,” said Giovanni Bisignani, IATA’s Director General and CEO. “When fuel goes from 13% of your costs to 40% in seven years with an increased cost implication of $183 billion, you simply cannot continue to do business in the same way. More airlines have gone bust in 2008 than in the aftermath of September 11.”