Airlines are expected to lose more than $9 billion through 2009, as the industry is facing a "perfect storm" of slow passenger growth and record fuel costs.
From the WSJ, quoting the International Air Transport Association:
The industry has been losing money this year as a result of higher fuel costs, as oil averaged $113 a barrel in the first six months of 2008, compared with $73 a barrel a year earlier.
The forecast for 2008 is worse than the outlook the trade group gave in June, even as fuel prices have declined. A deteriorating world-wide economy, which has helped bring down fuel prices, also has led to a slowdown in business and leisure travel.
The group's first look at 2009 outlined continued tough conditions for airlines.
Mr. Bisignani advised the industry to "fasten your seatbelts for at least another two years," the time it may take for the global economy to get stronger.
Airline execs might take some cold comfort in this, however. A new study shows that while share prices for airlines drop in the days after an accident, the effect of an accident doesn't translate to long-term weakness in the stock.
Researchers from San Diego State and Montreal's Concordia University found that "while the stock of the affected airline would plummet within the first seven days following the accident, there was no clear conclusion that could be drawn on the effect of long-term stock prices."
For most accidents, factors like legal liability matter more:
The research, currently awaiting publication in the International Review of Law and Economics, details how legal liability may play a role in stock prices following an airline disaster. For example, a mechanical failure may bring less liability upon the airline and may affect the stock prices of aviation manufacturers, thus may have less impact on lawsuit payouts and insurance claims.
The exception is terrorism. In that case, share prices are hit particularly hard over the long-term, as they were following Sept. 11, 2001.