Airline industry sees $5.2b loss this year

ISTANBUL - Airlines may report combined losses of about $5.2 billion this year, almost $3 billion higher than forecast in June, as economies slow and fuel costs erode earnings, the International Air Transport Association said.

Because of a recent drop in oil prices, the net loss will fall short of the $6.1 billion worst-case scenario the industry body envisaged in the last forecast, chief executive Giovanni Bisignani said yesterday in Montreal. Traffic growth will be lower than predicted as an economic slowdown spreads, he said.

IATA lifted the annual loss estimate for a fifth time in 12 months after passenger growth slumped to a five-year low in July and the number of carriers grounding planes or going bankrupt this year passed two dozen. Airlines had a profit of $5.6 billion in 2007, the first since the Sept. 11, 2001, attacks. The industry has lost more than $36 billion since 2001.

"We're still in a perfect storm of rising costs and falling demand," Bisignani said on a conference call. "When we made our last forecast we knew the situation was bad, but we didn't know how bad it would get. Profitability deteriorated dramatically in the first half."

The group, whose members account for 93 percent of international air traffic, based its loss estimate on an average oil price this year of $113 a barrel. Crude closed yesterday at $109.48 in New York.

World airline traffic this year is likely to increase only 2.8 percent, IATA said, compared with a previous forecast of 3.9 percent and growth of 5.3 percent in 2007 and 2006. Traffic rose 1.9 percent in July, the group said, the lowest monthly expansion since the 2003 SARS epidemic.

"A new development has been weaker economic growth outside the US, reflected in a deterioration in the outlook for air travel and freight," Bisignani said. The net loss next year may be $4.1 billion and traffic may increase 2.9 percent, down from a 4.5 percent estimate, according to yesterday's statement.