The International Air Transport Association (IATA) forecast on Tuesday a loss of $4.7 billion for the world's airline industry in 2009 which is almost double compared to the $2.5 billion loss forecast in December.

IATA expects the slump in passenger and cargo traffic worldwide to continue further as a result of the global recession.

IATA anticipates a 12 per cent ($62 billion) fall in revenue to $467 billion in 2009 which is worse than the industry had seen in the aftermath of the 9/11 between 2000 and 2002, when the decline was about 7 per cent ($23 billion).

''The state of the airline industry today is grim,'' said IATA director general and CEO Giovanni Bisignani in Geneva. ''Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago…Combined with an industry debt of $170 billion, the pressure on the industry balance sheet is extreme.''

IATA expects passenger traffic to shrink by 5.7 per cent over the year with even sharper fall in the premium segment which is the main revenue support. Cargo demand too is expected to drop to 13 per cent. Both the figures are significantly lower than the December forecast of 3 per cent drop in passenger demand and 5 per cent decline in cargo.

The yield is expected to fall by 4.3 per cent as airlines are unable to cut capacity at the rate at which demand is falling.

The only silver lining in the whole scenario is the falling fuel prices which are helping to contain even larger losses. A fuel price of $50 a barrel (Brent oil), the airline industry's fuel bill is expected to drop to 25 per cent of operating costs compared to 32 per cent when the oil price averaged $99 a barrel. Coupled with lower demand, the fuel expenditure will fall to $116 billion in 2009 compared to $168 billion in 2008.

''Fuel is the only good news. But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care. Airlines face two immediate fundamental challenges: conserving cash and carefully matching capacity to demand,'' said Bisignani.

The loss figures for 2008 too have been revised from $5 billion to $8.5 billion which showed a 70 per cent increase compared to the original estimate.
IATA represents 230 airlines covering 93 per cent of global air traffic which is spread over 6 global regions.

The worst hit regions are the Asia-Pacific with a staggering loss of $1.7 billion in 2009 followed by Europe with $1 billion where capacity cuts are not able to cope with drop in demand.

The only region which is expected to perform best is North America with a $100 million profit where a 7.5 per cent fall in demand is matched by corresponding cut in capacity.

Both Latin America and Africa are forecast $600 million losses each.

The Middle East is the only region with demand growth of 1.2 per cent in this year which is expected to be offset by higher capacity increase of 3.8 per cent, thereby resulting in a loss of $900 million.

Cost cutting measures
Airlines have been taking various measures to cut cost and attract more passengers. Singapore Airlines has asked staff to take unpaid leave up to 2 years, Cathay pacific told it could sell some of its assets, and Emirates said it would stop using the large A380 aircraft in the Dubai-New York sector. American Airlines and United Airlines have started charging passengers for their check-in baggage.

The cash crunch and difficulty in getting bank credits deter airlines from the purchase of new aircraft. Of the 1400 aircraft earmarked for delivery this year from Boeing and Airbus, only half will be absorbed by 2011. IATA said.

Bisignani said the prospects for airlines are dependent on economic recovery ''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'' he said.

He remarked that bail-outs are not solution to the problem but access to global capital, freedom to access markets and ability to merge and consolidate are the requirements to run the airline industry as a profitable business.