Airlines lose $11bn in 'worst ever year'

The airline industry suffered its biggest ever collapse in demand in 2009 - and worse may follow.

by
Last Updated: 31 Aug 2010

You’ve probably gathered that the air travel industry took a bit of a hammering last year, but new figures show just how bad it was: the International Air Transport Association reckons the airlines lost a combined $11bn last year, as passenger and freight traffic suffered their biggest declines since the war. ‘In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen,’ moaned IATA boss Giovanni Bisignani. And although things perked up slightly in December, the weakness of current demand could mean that more airlines go the same way as the unfortunate JAL in 2010…

IATA says that passenger traffic was 3.5% down on a year earlier; this may not sound disastrous, but it comes after many years of increases. The African airlines were most affected, suffering a near-7% drop in demand, while the Asia-Pacific and North American airlines were down nearly 6% and Europe’s finest plunged 5%. Only the Middle Eastern carriers emerged relatively unscathed: their numbers were up more than 11%, which suggests that they’ve been taking some business off the big name Western carriers like BA. And if passenger numbers took a hit, freight traffic took an even harder one: demand was down over 10% year-on-year. All in all, IATA reckons this will have resulted in a total loss of about $11bn for the big airlines.

The only ‘good’ news from IATA today was that the figures took a turn for the better in December, with passenger demand up 4.5% and freight traffic up by a quarter - suggesting that the industry may be through the worst of the turbulence. However, it’s worth pointing out that these figures are flattered by the weakness of the previous December (which was the worst month of the lot). As Bisignani admits, there are still ‘enormous challenges’ facing the big airlines: ‘The worst is behind us, but it is not time to celebrate,’ he warned today.

As in 2009, the industry’s biggest problem this year will be weak demand – in fact, if we all have less money to spend, demand could actually be even weaker than it was last year. This will force airlines to slash prices to flog more seats, says Bisignani, which will hurt revenues and profitability - as a result of which, he expects them to lose another $5.6bn in 2010 during what will be ‘another spartan year’. Since the Spartans liked to throw their weak, feeble and sickly children off the top of Mount Taygetus, ailing carriers like BA (still locked in a wrangle with its unions) will just hope that that they don’t suffer a similarly harsh fate.


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