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Airlines now predicting more turbulence than -

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ELEANOR HALL: The global economic downturn is hitting the international airline industry far harder
than even the key aviation players had expected.

The latest industry forecast predicts that airlines will lose twice as much as they planned for
this year; with the Asia-Pacific region likely to be the worst affected area.

The good news for passengers is that the price of tickets is likely to drop - at least in the short

Sara Everingham has our report.

SARA EVERINGHAM: Since the aviation industry released its last forecast in December the picture has
become much more gloomy.

The International Air Transport Association represents about 230 airlines around the world.

Its North America spokesman is Steve Lott.

STEVE LOTT: The state of the industry is grim. The global recession is taking a toll on the airline
industry and unfortunately we expect bigger losses as a result.

SARA EVERINGHAM: In fact the losses will be almost double what the association was predicting three
months ago.

Then it said airlines expected to lose the equivalent of about three-and-a-half-billion Australian
dollars this year.

That figure now stands at six-and-a-half-billion.

STEVE LOTT: We really haven't seen a drop this big since World War II. This is also, this downturn
is different than the drop we saw during the SARS crisis or even following the terrorist attacks of
September 11, 2001.

SARA EVERINGHAM: The biggest factor is that demand has dropped faster than expected - in all

Steve Lott says there's less cargo traffic, fewer people are taking holidays and the big hit for
airlines - business traveller numbers are continuing to decline.

STEVE LOTT: Well, I think any airline executive will tell you that they keep a close eye on the
front of the cabin especially for long haul international carriers, especially those in
Asia-Pacific which really put a focus on the premium cabin.

So really the airline industry closely watches this premium traffic even though it may represent,
you know, if it only represents five per cent or 10 per cent of the people on a flight, it could
represent 20, 30, 40 per cent of the revenue for that flight.

The point is that those business travellers, those corporate accounts are really keyed to airlines.
They put a lot of focus on that.

SARA EVERINGHAM: And he predicts it's the Asia-Pacific region that will be the hardest hit.

STEVE LOTT: We've seen Japan which is region's largest market; it is going to see its economy, its
GDP drop by more than five per cent.

We are seeing exports slow down. China has been a bit of a mixed bag. We've seen some demand in
domestic market but we expect international demand to and from China to weaken a bit and India was
the other country that everybody seemed to be focussed on.

India tripled in size between 2000 and 2008 but we expect that growth to slow significantly in

So overall, Asia-Pacific is expected to see about a 6.8 per cent fall in demand but only a four per
cent drop in capacity.

SARA EVERINGHAM: Tom Ballantyne is the Chief Correspondent of Orient Aviation Magazine.

TOM BALLANTYNE: Well, we are going to see airlines scrambling to try and adjust their capacity, the
number of seats they have flying to cope with the reduced demand.

SARA EVERINGHAM: So do you expect that in the region we will see fewer airlines operating by the
end of this year?

TOM BALLANTYNE: Yes, we may see fewer airlines but I don't think we will see any major carriers
collapse or disappear.

The big operators like the Qantas's, the Cathay Pacifics, the Singapore Airlines, Malaysia
Airlines, you know all these carriers have relatively strong balance sheets considering the

SARA EVERINGHAM: But is there any good news in the report?

Tom Ballantyne says there might be some benefits for customers.

TOM BALLANTYNE: It probably means some pretty good airfare deals. I mean the fact is that when
airlines have a problem filling the number of seats they have flying around.

SARA EVERINGHAM: Steve Lott says it's hard to predict whether more airlines will fold but he does
think airlines could reduce flights and services and or continue to delay orders for new planes.

Steve Lott says prospects for the industry might improve towards the end of the year but that too
is difficult to predict.

STEVE LOTT: We are not sure if we have hit rock bottom yet. That is what is really worrying in that
we continue to see the trends weakening. We see traffic weakening and demand weakening.

So we are not sure if we have hit bottom yet and we are certainly not clear on when a recovery will
begin or how quickly traffic will come back.

ELEANOR HALL: That is Steve Lott from the International Air Transport Association ending Sara
Everingham's report.