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Airlines group predicts big industry losses

WORLD airlines will lose US$4.7 billion this year due to the economic crisis, while revenues will by drop more than after the Sept. 11, 2001 terrorist attacks in the US, a major industry association predicted today.

The revised loss estimate, nearly double the previous forecast issued in December, reflects "the rapid deterioration of the global economic conditions," said the International Air Transport Association.

"The state of the airline industry today is grim," said IATA CEO Giovanni Bisignani. "Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago."

Revenues are expected to fall by US$62 billion, or 12 percent, to US$467 billion, the association said.

"Resizing the industry will be much tougher than the adjustments we saw after 9/11 or SARS," Bisignani said.

The 2001 attacks in the United States had a major impact on air travel. Industry revenues fell about 7 percent, or US$23 billion, from 2000 to 2002. The 2003 outbreak of Severe Acute Respiratory Syndrome in Asia also led to a major decline in air travel, especially in the region.

"The pressure on the industry balance sheet is extreme," said Bisignani.

Running counter to the trend in the outlook is North America, where carriers are expected to deliver the best performance with a combined US$100 million profit for the year, the association said.

"A 7.5 percent fall in demand is expected to be matched by a 7.5 percent cut in capacity," IATA said. "Despite the worsening economic conditions, this is relatively unchanged from the earlier forecast of a US$300 million profit. Carriers are benefiting from careful capacity management and lower spot prices for fuel."

The group, which represents 230 airlines worldwide, said passenger traffic is expected to drop by 5.7 percent over the year. Cargo demand will decline by 13 percent.


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