THE AIRLINE industry will suffer a $2.5 billion net loss next year despite the big fall in the oil price, as carriers are overtaken by falling demand for air travel amid the deepening recession in several leading economies.

“The outlook is bleak,” Giovanni Bisignani, director general of the International Air Transport Association (Iata), said yesterday. “The chronic industry crisis will continue into 2009. We face the worst revenue environment in 50 years.”

Iata said all regions apart from the US were expected to report larger losses in 2009 than this year. Including 2009, the global aviation industry will have been in net loss for eight of the last nine years, according to the Iata forecasts, after making net profits in only 2000 and 2007 during the decade.

Losses for European airlines would increase tenfold to $1 billion with the main economies in recession, high fuel prices partially locked in by hedging policies at many carriers and the weaker euro against the dollar exaggerating the impact.

Iata forecasts a $35 billion fall in aviation industry revenues to $501 billion next year, the first drop in revenues since the two consecutive years of decline in 2001 and 2002.

Passenger traffic is forecast to fall by 3 per cent in 2009 following growth of 2 per cent this year, the first decline since a drop of 2.7 per cent in 2001, when the industry was hit by weakening economic growth and then by the plunge in demand for air travel following September 11th terrorist attacks.

Cargo traffic is forecast to fall even more steeply, with a decline of 5 per cent following a 1.5 per cent drop in 2008. The air cargo market is regarded as an important early indicator of the health of the world economy. Air freight accounts for 35 per cent of the value of internationally traded goods.

The “ferocity of the economic crisis” had overshadowed the restructuring gains achieved by airlines during recent years, said Mr Bisignani, and carriers were struggling to match capacity with the expected 3 per cent drop in passenger demand for 2009.

Overall industry losses are forecast to halve, from $5 billion this year to $2.5 billion – largely due to better results from North American carriers, which are forecast to move from a $3.9 billion loss this year to a modest $300 million net profit in 2009. – (Financial Times service)