IATA Says Outlook Bleak for Global Aviation
Feb. 18, 2008
Global airlines are likely to see a further profit cut in 2008 as the global credit crisis deepens, while fuel costs remain near record highs, the International Air Transport Association (IATA) said on February 17.
The association, which represents 240 airlines comprising about 94 percent of international air traffic, in December slashed its 2008 earnings forecast for members by more than a third to US$5 billion, citing the two factors. It is due to revise the forecast in two months.
"We will have to see in April what happens. But if these are the conditions, then I think we may expect a downgrade," IATA director general and chief executive Giovanni Bisignani said ahead of the Singapore Airshow this week.
Growth in global travel demand is expected to slow this year on fears that a possible US recession will lead to a global economic slowdown, while crude oil is still trading at more than US$95 a barrel.
Bisignani, who was chief executive of ailing Italian airline Alitalia before joining IATA in 2002, said signs of the slowdown emerged in December when the United States recorded a 3 percent decline in domestic air traffic.
"Now business traffic, with the high yields, has started to decrease ... the traffic of bankers flying between London and New York, Paris and New York; this we started seeing in the first two months of this year," Bisignani said.
Total net profit of Asia-Pacific airlines is forecast to drop to US$600 million in 2008 from US$700 million last year - the lowest in four years - as capacity expansion outstrips the rise in passenger demand.
Asian airlines will receive 427 new planes this year, boosting capacity by 8 percent, while passenger demand will rise just 6.4 percent, Bisignani said.
But he expects carriers in the region, especially in booming China and India, to continue ordering new planes to meet long-term domestic demand, while emerging low-cost carriers will also be hungry for more capacity.
Analysts are expecting Asian airlines to announce up to US$20 billion worth of aircraft orders during the Singapore Airshow.