Airlines to Lose $5.2B in 2008

The International Air Transport Association (IATA) issued a revised industry financial forecast that would see the global airline industry post losses of $5.2 billion in 2008 as a result of higher oil prices and softening passenger demand. "The situation remains bleak. The toxic combination of high oil prices and falling demand continues to poison the industry's profitability," said Giovanni Bisignani, IATA's director general and CEO. While there has been some relief in the oil price in recent months, the year-to-date average is $113 per barrel. That's $40 per barrel more than the $73 per barrel average for 2007, pushing the industry fuel bill up by $50 billion to an expected $186 billion this year. Fuel is expected to rise to 36% of operating costs, up from 13% in 2002. Meanwhile, IATA announced industry traffic data for July that showed a continued slowing of demand. IATA announced its initial outlook for 2009 in which the difficult business environment is expected to continue. Industry losses are expected to continue at $4.1 billion. The 2009 fuel bill is expected to rise as hedging offers less protection.