Airline losses top $6B in first half of the year

GENEVA — Airline companies lost more than $6 billion during the first half of the year due to the economic crisis, even as fresh figures showed some signs of recovery in the passenger and freight business, an industry group said Tuesday.

A sample of more than 50 airlines found their losses declined to $2 billion in the second quarter from $4 billion in the first quarter, the International Air Transport Association (IATA) said, noting that the April-June period is usually a strong one for the industry.

"Since the sample of airlines is incomplete, total industry losses in the first half of 2009 are likely to have been in excess of the reported $6 billion," IATA said.

The Geneva-based group, which represents 230 airlines worldwide, said seat occupancy in international markets stabilized in July — the first time in over a year — but added that airlines need to further cut capacity to meet demand.

The first-half loss "means IATA's forecast for the rest of the year is too low," said Nick Cunningham, an aviation and aerospace analyst at Evolution Securities in London. "The winter is only marginally profitable in good years. This year it's going to be really severe."

The organization's June forecast for the full year calls for combined losses of $9 billion. IATA will issue an update on expected losses on Sept. 15.

Freight capacity also still exceeds demand despite an 8.1 percent capacity cut in July, IATA said.

"With excess capacity continuing through Q2 it was not surprising that freight rates were down more than 20 percent over the year," it said.

Overall, the industry outlook remains volatile, IATA said.

Airlines are still adding to their fleet because of long-term orders committed to before the downturn.

Figures show companies increased their aircraft numbers by a net of 487, or about 2 percent of their overall fleet.

"Replacement and expansion of the fleet has delivered significant fuel-efficiency savings," IATA said.

Louis Gallois, who heads Boeing rival Airbus, said the market for commercial jets has yet to recover and airlines may be less inclined to take on new aircraft in the next year or two as they grapple with declining traffic.

"The market isn't dead, we have some campaigns, but it's not extremely active," Gallois said in an interview in Paris. "It's not like two or three years ago."

Airlines may struggle to keep adding planes next year and in 2011, Gallois said, as balance sheets are weakened by falling traffic. Airbus has so far only secured half of the 300 orders it had earmarked for this year.

The dearth of orders is one indicator a recovery isn't yet under way, even amid some signs the global economy is emerging from recession, Gallois said.