The airline sector is facing unprecedented turbulence. According to analysts, airlines could suffer losses of US$9 billion this year. As recently as March, the red ink was estimated at US$4.7 billion for 2009, according to the International Air Transport Association (IATA). IATA has also adjusted its estimates for losses in 2008, from US$8.5 billion to US$10.4 billion. Giovanni Bisignani, director general of IATA, painted a gloomy picture for the industry at the association’s latest annual meeting in Kuala Lumpur, Malaysia, affirming that “there is no modern precedent for today’s economic meltdown. We are witnessing a cataclysm. Our industry is trembling (Airline Industry’s Rising Crises, Wharton Business School, 2008).”
According to IATA, airline cargo revenues will drop 17%. Carriers will transport 33.3 million tons, in comparison with 40.1 million tons in 2008. Similarly, demand by passengers could drop 8% to 2.06 million travelers, in comparison with 2.24 million in 2008. Add to those reductions in profits of 11% for cargo and 7% for passengers. Overall, IATA estimates that revenues will drop by 15%, from US$528 billion in 2008 to US$448 billion in 2009 – numbers that are unprecedented (Low cost for Long Haul, Flightsglobal, 2005).
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