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28 March 2024

Airlines lost $8bn in 2008

The aviation sector lost $4bn in Q4 of 2008. (GETTY IMAGES)

Published
By Shweta Jain

Major international airlines recorded losses of up to $8 billion (Dh29.3bn) in 2008, much more than the previously projected $5bn, owing to the worsening of the industry downturn in the fourth quarter of last year, according to the latest financial report by International Air Transport Association, or Iata.

The aviation trade body said that $4bn losses recorded by world airlines in the final quarter of 2008 alone were "larger than expected", as the global economic downturn caused passenger and cargo volumes to tumble.

Meanwhile, airlines also lost money on hedging as fuel prices reached their record highs in the first half of 2008, IATA said in its Airlines Financial Health Monitor report. "Unlike earlier in the year airlines are now losing money at the operating level," it said.

Even though jet fuel prices have fallen towards $40 a barrel, from nearly $150 a barrel last year, "many airlines have part of their fuel bill partly locked, through hedging, into higher prices", it said.
"Hedging losses were a large part of the larger than expected reported Q4 losses," Iata pointed out.

Iata said recently it expects revenues to fall $35bn to $500bn in 2009, leading to a loss of $2.5bn for the industry. Furthermore, airlines parked 73 older planes in January this year, raising fuel efficiency and cutting capacity, but as yet not by enough since load factors were down about three per centage points with profitability deteriorating further. "Airlines are responding to the slump in demand by trying to shrink capacity," Iata said in its report.

Passenger traffic in January fell 5.6 per cent over January 2008, compared with a 4.6 per cent drop in December.