IATA Predicts 2008 Downturn

The International Air Transport Association (IATA) estimating a global industry profit of US$5.6 billion in 2007 falling to US$5.0 billion in 2008.The outlook is unchanged for 2007 at US$5.6 billion. Higher oil prices were offset by strong traffic growth (5.9% for passenger traffic) and even stronger revenue growth of 8.4%. “For the first time since 2000, we are profitable. But with a 1.1% margin, the bottom line is still peanuts,” said Giovanni Bisignani, IATA’s director general and CEO. IATA sharply revised downward its outlook for 2008 to US$5.0 billion from the previously forecast US$7.8 billion. The spike in fuel prices is expected to add US$14 billion to the industry fuel bill, driving it up to US$149 billion. The broadening impact of the credit crunch is expected to slow revenue growth to 4.7% and traffic growth to 4.0%. Simultaneously, capacity expansion is expected to accelerate in 2008 with an increase in aircraft deliveries to 1,281 (up from 1,041 in 2007). “The challenges get tougher in 2008. A favorable economic environment and effective efficiency measures helped mitigate the impact of high fuel prices and underpinned profitability improvements. With the credit crunch, that is changing. The peak of the business cycle is over and we are still US$190 billion in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall,” Bisignani added.