Airline industry counting its losses

PUBLISHED : Tuesday, 05 August, 2003, 12:00am
UPDATED : Tuesday, 05 August, 2003, 12:00am

Sars, Iraq war will cost it US$6.5b this year, says IATA chief

The international airline industry, brought to its knees in the first half of the year by Sars and the Iraq war, is expected to lose as much as US$6.5 billion this year, the head of the International Air Transport Association (IATA) said yesterday.

But the industry will probably return to profit next year, said Giovanni Bisignani, the director-general and chief executive of the association.

Already, pent-up demand in the wake of the twin crises for travel meant passenger numbers were bouncing back quickly, Mr Bisignani added.

'In this part of the world, traffic is recovering very quickly,' Mr Bisignani said before giving a speech to the Aerospace Forum.

'In 2004 we will start seeing profits again in our airlines.'

The IATA, the airline industry's de facto governing body, has 277 members representing 98 per cent of global air traffic.

Mr Bisignani said the Sars crisis would account for the majority of the airline industry's losses this year. Carriers lost US$4 billion because of the viral outbreak, with half of that coming from Asia-based airlines, while the Iraq war accounted for the remaining US$2.5 billion in losses, he said.

Analysts expect Cathay Pacific, one of the carriers hardest hit by Sars, to post a loss of about $1.2 billion to $1.45 billion for the first half, its biggest ever, when it announces its results tomorrow.

Both the war and the Sars outbreak paralysed air travel in Asia and North America. The industry was already flagging due to economic woes and the September 11 terrorist attacks. From June to January, airlines carried 7 per cent fewer passengers globally compared with the first half of last year. The Asia-Pacific region was hardest hit, with passenger numbers dropping nearly 16 per cent during that period.

But Mr Bisignani says numbers have been improving. In May, airlines carried 20 per cent fewer passengers compared with the same month last year, but in June that number improved to 12 per cent.

'We have turned a corner,' Mr Bisignani said, but added: 'The economic situation of airlines has started to recover but it's a recovery that will take more time.'

China will be a main source of growth. Globally, the IATA forecasts airlines will carry 6 per cent more passengers next year compared with 2003. China, however, is expected to grow by 9 per cent.