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Airline industry suffers worst ever year

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by Kay Mitchell

The airline industry has been hit hard during the global economic downturn, which has led to a slump in demand for air travel with fewer people travelling.

Many airlines went bust during the downturn, not just due to a fall in demand but also as a result of higher fuel prices.

According to the International Air Transport Association (IATA), 2009 saw the biggest decline in air passenger traffic since the aftermath of World War II.

The Industry body’s chief, Giovanni Bisignani, said: “In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen.

“The industry starts 2010 with some enormous challenges. The worst is behind us, but it’s not time to celebrate. Adjusting to 2.5 to 3.5 years of lost growth means that airlines face another spartan year, focused on matching capacity carefully to demand and controlling costs.”

The IATA shows that air cargo traffic soared by a quarter in December compared with a year earlier, while passenger demand improved.

Freight demand grew 24.4% last month but overall, 2009 was 10.1% lower than in 2008. The IATA added that passenger demand grew 4.5% for a full-year decline of 3.5%.

One major casualty of the downturn was Japan Airlines (JAL) which was forced to file for bankruptcy protection last week.

JAL, which is Asia’s biggest carrier, has been grappling with a mountain of debts of around $16.5 billion (£10 billion). It shares plummeted to a record low of just 3 yen and has lost more than 90% of its market capitalisation since the beginning of January.

The Japanese Government has said that flights will operate as normal and the airline is to begin its restructure under the watchful eye of the state-backed turnaround body (the Enterprise Turnaround Initiative Corp of Japan).

Finally, IATA estimates that airlines collectively lost $11 billion (£6.8 billion) in 2009 and believes that airlines will suffer losses of $5.6 billion (£3.5 billion) in 2010 – an increase from the $3.8 billion it originally predicted.

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News posted: January 27, 2010

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