Europe's carriers to lose US$1bn in 2009

24 Mar 2009 by Mark Caswell

European airlines are expected to lose a combined total of US$1bn this year, with the global airline industry facing a loss of US$4.7bn, according to a forecast by The International Air Transport Association (IATA).

Today’s figure is an update on the previous global forecast loss for 2009 of US$2.5bn, made in December, “reflecting the rapid deterioration of the global economic conditions”.

"The state of the airline industry today is grim," said Giovanni Bisignani, IATA’s Director General and CEO. "Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago. Our loss forecast for 2009 is now US$4.7 billion. Combined with an industry debt of US$170 billion, the pressure on the industry balance sheet is extreme."

The forecast also expects passenger traffic to contract by 5.7 per cent over the year, with “an even sharper fall in premium traffic”. The only silver lining (for the airlines at least) is that lower fuel prices means the industry’s fuel bill is expected to drop to 25 per cent of operating costs (compared to 32 per cent in 2008).

Asia Pacific is expected to be the hardest hit region, with a forecast loss of US$1.7bn during 2009, with Europe expected to lose US$1bn, the Middle East forecast for a US$800m loss, and Latin America and Africa expected to lose US$600m each. North America is the only region expected to produce positive results in 2009, with IATA forecasting a US$100m profit.

“The prospects for airlines are dependant on economic recovery,” said Bisignani. “There is little to indicate an early end to the downturn. It will be a grim 2009. And while prospects may improve towards the end of the year, expecting a significant recovery in 2010 would require more optimism than realism.”

Bisignani added that recovery “will not come without change”, saying that "access to global capital, the ability to merge and consolidate and the freedom to access markets are needed to run this industry as normal profitable business”.

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Report by Mark Caswell

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