2009 is expected to be a terrible year for the global airline industry, with collective losses predicted to be near $2.5 billion (yes, billion) due to the worldwide recession and an overall drop in passenger volume.
Air carriers in all regions except North America are set to earn no profit in the coming year, despite taking cost-cutting measures such as laying off staff and eliminating unprofitable routes.
The hardest hit region will be Asia, where losses are expected to amount to almost $1.1 billion, and not far behind is Europe, where losses will hit the $1 billion mark.
The Middle East and Latin America will both lose in the neighborhood of $200 million, while Africa will lose about $300 million.
One piece of good news is that North American carriers can expect to earn a modest $300 million profit in 2009, which only amounts to one percent of their revenue, but is a positive sign nevertheless.
The other bit of good news is that expected global losses in 2009 are only half as great as they were in 2008, when last summer’s oil price spike cause airlines to lose a total of $5 billion. Next year fuel prices are expected to stabilize at about half the amount they were at in July 2008.
U.S. airlines forestalled huge losses by acting quickly during the fuel crisis and by changing their business strategy in the face of impending recession. Many raised prices, added surcharges, cut staff, and trimmed the fat from their routes by cutting excess capacity.
Those changes should allow American carriers to be more competitive in the coming year, during which global air traffic is expected to decline by three percent. The decrease will be the first since 2001, when air travel dropped by 2.7 percent in the wake of the 9/11 terrorist attacks.
Related Links: Associated Press, Bloomberg
By Karen Elowitt for PeterGreenberg.com.
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