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Originally published Tuesday, March 24, 2009 at 11:00 AM

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Airlines group predicts big industry losses

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

Associated Press Writer

GENEVA —

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

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 $62 billion, or 12 percent, to $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 $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 $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 $300 million profit." U.S. carriers will benefit from having cut unprofitable routes and avoided stockpiling fuel while prices were high.

Despite facing difficult times ahead, IATA chief Bisignani said the airline industry would not be asking for bailouts. Instead, he called on governments to stop increasing airline taxation, much of which he said was being used to fund the banking industry rather than the environmental projects it was supposedly earmarked for.

IATA, 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.

"Both are significantly worse than the December forecast of a 3.0 percent drop in passenger demand and a 5.0 percent fall in cargo demand," it said.

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Bisignani said losses would have been even larger without the fall in fuel prices in recent months.

IATA also revised upward to $8.5 billion its forecast losses for last year. The previous estimate was $5 billion.

"The fourth quarter of 2008 was particularly difficult," with carriers reporting a very sharp fall in lucrative premium travel and cargo traffic, it said.

The Asia Pacific region is the hardest hit. It is expected to post losses of $1.7 billion, compared with the previous forecast loss of $1.1 billion.

Europe's carriers are expected to lose $1 billion in 2009, and Latin America is expected to see traffic plunge by 7.8 percent. African airlines are expected to lose $600 million, compared with 2008 losses of $100 million.

The Middle East will continue to see a 1.2 percent growth in demand, well off the double-digit increases of recent years.

IATA chief economist Brian Pearce told reporters in Geneva that plane deliveries from Boeing Co. and Airbus are expected to tail off to 700 a year by 2011 as airlines delay and cut back on orders. Last year, deliveries from the big two aircraft makers totaled 1,100.

IATA chief Bisignani also renewed his call for airline ownership rules to be relaxed, saying that consolidation was the only way forward for an industry that has long been starved of outside investment.

Copyright © 2009 The Seattle Times Company

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