Airlines worldwide are expected to suffer a combined loss of $9billion in 2009, according to a revised forecast by the International Air Transport Association (IATA). This is nearly double the association's March estimate of a $4.7 billion loss, reflecting a rapidly deteriorating revenue environment.

IATA also revised its loss estimate for airlines in 2008 to $10.4 billion from the previous estimate of $8.5 billion.

''There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced. After 11 September, revenues fell by 7 per cent. It took three years to recover lost ground, even on the back of a strong economy. This time we face a 15 per cent drop - a loss of revenues of $80 billion - in the middle of a global recession,'' said Giovanni Bisignani, IATA's director general and CEO.

''Our future depends on a drastic reshaping by partners, governments and industry. We cannot bear the cost of government micro-regulation, crazy taxation and partners abusing their monopoly power,'' he said in his `State of the Industry' address to 500 of the industry's top leaders gathered in Kuala Lumpur for the 65th IATA annual general meeting and World Air Transport Summit.

Recession is the most significant factor impacting the industry's bottom line. IATA's revised forecast sees revenues declining an unprecedented 15 per cent ($80 billion) from $528 billion in 2008 to $448 billion in 2009.

Air cargo demand is expected to decline by 17 per cent. In 2009, airlines are forecast to carry 33.3 million tonnes of freight, compared to 40.1 million tonnes in 2008. Passenger demand is expected to contract by 8 per cent to 2.06 billion travelers compared to 2.24 billion in 2008. The revenue impact of falling demand will be further exaggerated by large falls in yields-11 per cent for cargo and 7 per cent for passenger.

Bisignani noted risks and challenges:

Fuel bill:
With the average price of oil at $56 per barrel (Brent), Bisignani said, airlines' fuel bill, which account for 23 per cent of the industry's operating cost, is forecast to decline by $59 billion to $106 billion in 2009. By comparison, the 2008 fuel bill was $165 billion (31 per cent of costs) at an average price of $99 per barrel.

''The risk that we have seen in recent weeks is that even the slightest glimmer of economic hope sends oil prices higher. Greedy speculation must not hold the global economy hostage. Failure to act by governments would be irresponsible,'' said Bisignani. 

Labor productivity across airlines improved by 71 per cent over the last decade. Fuel efficiency increased by 20 per cent and load factors rose by 7 percentage points. The dramatic downturn in demand could push non-fuel unit costs higher, which cannot be cut in proportion, he said.

Airlines have improved their cash reserves at $70 billion or 13 per cent of revenues against the 9 per cent they had in 2000. Some of this is being funded by the $170 billion industry debt or by asset sales.

''We are in a better cash position than when we faced the challenges of 11 September. But our pockets are not that deep. A long L-shaped recovery could drain the industry of cash,'' said Bisignani.

Load factor worldwide decreased by about three percentage points for the first quarter of 2009 compared to the previous year. However, the 4,000 aircraft expected to enter the commercial aviation fleet in the next three years will make this an ongoing challenge.

Consolidation within political borders (including Air France-KLM, Lufthansa-Swiss, Delta-Northwest, Cathay Pacific-Dragonair) has created stronger players. But archaic limitations on ownership continue to prevent broader consolidation and partnerships across borders, he said.

Regionwise, North American carriers are expected to show a loss of $1.0 billion, way lower than the $5.1 billion loss in 2008.

European carriers are expected to post losses of $1.8 billion with collapsing demand for premium services in all major markets served by the region's carriers (intra-Europe, North Atlantic and Europe to Asia).

With Japan, the Asia-Pacific's largest market, in recession, carriers in the region will post the largest losses at $3.3 billion. The growth markets of China and India are delivering major losses as export-driven demand slows. This is a slightly better performance than the $3.9 billion that the region's carriers lost in 2008.

Middle East carriers, despite strong traffic growth, will see losses deepen to $1.5 billion. The region's intercontinental hubs are vulnerable to recessionary impacts in both European and Asian source markets, the IATA chief said.

Latin American carriers are expected to post a loss of $900 million, as the impact of the recession in the US and China weakens demand for the region's commodities.

African carriers are expected to see losses of $500 million. This is the result of a loss of market share combined with the impact of the recession.
The industry crisis is making liberalisation even more critical.

''We cannot manage in these unprecedented times with one hand tied behind our back. Airlines need the same commercial freedoms that every other industry takes for granted-access to global markets and capital,'' said Bisignani.

Bisignani urged governments to avoid protectionist policies as they stimulate economies. ''The forces of de-globalisation are gathering strength. World trade is already suffering with a 15 per cent downturn. Protectionism is the enemy of global prosperity. In the 1930s, it prolonged the recession. And it will not work today. To build a strong global economy, we must fight hard to keep the world trading,'' said Bisignani.