The International Air Transport Association announced Tuesday a revised outlook for the global air transport industry, with losses of $4.7 billion in 2009.

These losses, the IATA said, would be significantly worse than its December forecast for a $2.5 billion loss in 2009, reflecting the rapid deterioration of the global economic conditions.

The IATA reported that it expects revenues to fall by 12% to $467 billion. By comparison, the previous revenue decline, after the events 9/11, saw industry revenues fall by $23 billion from 2000 to 2002.

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.

Demand, the IATA noted, is projected to fall sharply with passenger traffic expected to contract by 5.7% over the year.

Revenue implications of this fall will be exaggerated by an even sharper fall in premium traffic.

Cargo demand is expected to decline by 13.0%, and both are significantly worse than the December forecast of a 3.0% drop in passenger demand and a 5.0% fall in cargo demand.

Falling fuel prices are helping to curb even larger losses, the IATA said.

With an expected fuel price of $50 per barrel (Brent oil), the industry's fuel bill is expected to drop to 25% of operating costs (compared to 32% in 2008 when oil averaged $99 per barrel).

Combined with lower demand, total expenditure on fuel will fall to $116 billion (compared to $168 billion in 2008).

Fuel is the only good news, Bisignani said.

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.

IATA also revised its forecast losses for 2008 from $5.0 billion to $8.5 billion. The fourth quarter of 2008 was particularly difficult as carriers reported large hedging-related losses and a very sharp fall in premium travel and cargo traffic.

Most of the deterioration forecast for 2009, the IATA added, had already happened by January.

As manufacturers end their de-stocking there should be a modest bounce in air freight as component shipping rises a little.

Still, weak consumer and business confidence is expected to keep spending and demand for air transport low.

The prospects for airlines are dependant on economic recovery, Bisignani said.

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 further cautioned, Recovery will not come without change. There is no doubt that this is a resilient industry capable of catalysing economic growth. But we are structurally sick. The historical margin of this hyper-fragmented industry is 0.3%.

He added, Bail-outs are not the prescription to return to health. 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. This is IATA's Agenda for Freedom - and a very cost effective solution for governments desperate to stimulate their economies.

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