Airline losses forecast doubles to Sh700b as recession bites harder

By John Oyuke

Global airlines will lose $9 billion (Sh702 billion) this year, double the level forecast in March as recession continues to batter the industry’s net earnings.

International Air Transport Association (Iata) has revised its airline financial forecast for the year to nearly double the March estimate of a $4.7 billion (Sh366 billion) loss, reflecting a rapidly deteriorating revenue environment.

The global airline trade association also revised its loss estimate for last year to $10.4 billion (Sh811 billion) from the previous estimate of $8.5 billion (Sh663 billion).

African carriers are expected to suffer losses of $500 million (Sh39 billion) this year as a result of loss of market share combined with the impact of the recession.

Iata’s Director General Giovanni Bisignani said airline losses in the first three months of the year have been severe than expected.

Revised forecast

Bisignani was speaking in his State of the Industry address to top leaders gathered for the 65th Iata Annual General Meeting and World Air Transport Summit in Kuala Lumpur, Malaysia. The revised forecast comes at a time when Kenya’s national carrier Kenya Airways reported an annual loss of Sh5.6 billion as its fuel-hedging loss ballooned to Sh8.9 billion for the fiscal year ending March 31.

This was the airline’s first losing fiscal year after thirteen years of profitability. The airline was listed at the Nairobi Stock Exchange in 1996.

While the Board of KQ recognised the loss after tax compared unfavourably with the prior year’s reported profits, it remained optimistic that the company’s performance would improve in the year to 31 March 2010.

Bisignani said there is no modern precedent for today’s economic meltdown, noting the ground had shifted and the industry has been shaken. "This is the most difficult situation that the industry has faced," he told the Kuala Lumpur Summit.