The world’s airlines are again heading for dramatic losses this year as demand remains weak andyields tumble, leaving the express and parcel industry facing a mix of excess capacity and rising
costs.Describing the airline industry as “in a massive crisis”, the International Air TransportAssociation (IATA) yesterday said losses will continue in 2010 with only a modest traffic recovery,and warned that it could take commercial airlines years to recover from the losses and revenuedeclines experienced in 2008 and 2009. The four integrators, FedEx, UPS, DHL and TNT, each withtheir own airlines, have all been hit by serious volume and revenue declines over the last year.
At the same time, air cargo customers, including express and parcel companies, who havebenefitted from heavy double-digit falls in airlift rates in recent months, now face the prospectof some airlines trying to hike rates dramatically to try to reverse the dramatic slump as demandstabilises. These include Lufthansa Cargo (+25%), Air France-KLM (+20%-30%), Singapore Airlines andCathay Pacific. At the same time, rising fuel surcharges will also increase costs for air cargocustomers. The CEP sector relies on airlift for its premium express products and intercontinentaleconomy shipments while domestic and intra-regional economy shipments tend to be transported on theground.
IATA predicted that the world’s airlines would lose a total of $11 billion this year, $2billion more than the previous forecast, due to a 15% revenue fall, exceptionally weak yields andrising fuel prices. The airline association also revised its 2008 loss estimates up to $16.8billion from $10.4 billion.
In the air cargo sector, traffic is expected to decline by 14% this year and yields are seendropping 15%. Worldwide airline cargo revenues are seen at $44 billion this year, down from $61billion in 2008. Cargo capacity utilisation remains at less than 50% despite the removal of 227freighters from service since the start of this year, representing 3% of global capacity, IATAsaid. At the same time, oil prices have risen sharply in recent months in anticipation of improvedeconomic conditions.
In its Q3, 2009, cargo report, IATA noted more positively that air freight volumes haveslowly improved in recent months due to more industrial production, particularly in Asia, with moreshipments in sectors such as semi-conductors. Moreover, air volumes have recently risen ahead ofocean freight. “It seems that the rise in air freight is due to shippers requiring more timelytransport as economies revive, rather than relative prices,” the association commented. But excesscapacity forced yields down sharply by 20% in Q2, and deliveries of new aircraft and flows out ofstorage risk increasing this excess capacity, it pointed out.
“The bottom line of this crisis – with combined 2008-9 losses at $27.8 billion – is largerthan the impact of 9/11,” said Giovanni Bisignani, IATA’s Director General and CEO. Industry lossesfor 2001-2002 were US$24.3 billion. “The optimism in the global economy has seen passenger andfreight volumes rise, but that is the only bright spot. Rising costs and falling yields havesqueezed airline cash flows. The sharp decline in yields will leave a lasting mark on the industry’s structure. And revenues are not likely to return to 2008 levels until 2012 at the earliest.”
Looking ahead to 2010, IATA predicted airline losses of $3.8 billion based on a limitedrevival of growth in traffic volumes of 3.2% for passenger and 5% for cargo, low yield improvementsof 1.1% for passengers and 0.9% for cargo, and oil at $72 per barrel compared to the expected 2009average price of $61 per barrel.
