IATA: Q4, Full Year Losses Steeper

New statistics released by IATA provides further evidence of the worsening financial condition of the global airline industry.

IATA now believes that fourth-quarter losses will be much higher than it forecast just over two months ago. As more Asian and European carriers report, the quarterly loss has reached $4 billion, year-on-year. This means the 2008 industry net loss will be closer to $8 billion, compared with the earlier prediction of $5 billion. IATA’s latest update of its 2009 forecast is due at the end of March, and it will likely be raised from the previous forecast of a $2.5 billion loss.

The fourth quarter will likely see an operating loss of $2.5 billion, IATA estimates. Regional net losses totaled $2 billion for the U.S., $1. 4 billion for Europe, and $746 million for Asia/Pacific. Other regions collectively saw a $169 million profit.

These losses are reflected in airline stock performance, which was down 7% globally in January. U.S. carriers were particularly hard hit, with the Bloomberg airline index down 28% in February and 42% since the start of the year. European and Asian stocks were only down 2%-3% in February, although European equity prices have dropped 20% since the beginning of the year.

Capacity is falling, but not enough to offset the traffic decline. IATA has already reported that January capacity in international markets was down 2% year-on-year (DAILY, Feb. 27), with loads dropping 2.8 points. September marked the point where international capacity started declining, and also the point where loads began falling, IATA notes.

IATA believes crude oil prices “appear to have formed a floor” just above $40 a barrel. The jet fuel crack spread has “narrowed to more normal levels,” with the jet fuel equivalent price dropping toward $50 a barrel.

Quoting data from Ascend, IATA says 73 aircraft were put into storage in January and another 26 retired, versus 93 new deliveries. In the past five months, 632 aircraft, representing 2%-3% of the fleet, have been taken out of service, with 441 new deliveries.