Airline Losses Expected to Reach $11 Billion in 2009
Friday, October 2nd, 2009
The International Air Transport Association had predicted a loss of $9 billion for airlines across the globe in the summer of 2009, but recent statistics show that the actual loss may reach as much as $11 billion for the year. Airlines around the world are still struggling to fill their seats and are having difficulty drumming up business from travelers who were once frequent fliers. In addition to the steady decline in demand for leisure travel, companies have been cutting back on their expense budgets by trimming down travel or eliminating it completely for the year. Airlines have suffered from these changes, and have made adjustments by increasing baggage fees and other fees related to the cost of travel, and offering last-minute deals and specials. Still, demand for seats overall has decreased enough that incentives and increased baggage fees will not help recover the loss. The IATA’s director reports that the overall revenue yield for each airline has dropped significantly enough that it has no hopes of recovering.
The predicted losses may not have taken into account the steady increase in fuel prices, and the continued reduced demand for domestic and overseas travel over the summer. Some airlines overseas are looking for help from their local governments, waiting for a bailout that will help them turn their businesses around and start generating profits. Others are looking into mergers and downsizing their fleets just to stay afloat in the competitive economy.
Still, airlines that are relatively secure in their markets are looking for expansion opportunities and may soon be able to serve additional regions as demand for leisure and business travel begins to increase. Until then, the airline industry is still fairly weakened by the economic turmoil, and it may take several months and years for the major airlines to recover and start turning a healthy profit.
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