A turbulent outlook ahead for airlines

An American Airlines arrivals list at LaGuardia Airport in New York City.

TEXT OF STORY

Steve Chiotakis: The Federal Reserve begins its two day meeting on interest rates today. No one's expecting rates to go up. Last week chairman Ben Bernanke said the economy still faces, in his words, formidable headwinds.

Those gusts are certainly being felt in the airline industry. A new report today finds a turbulent outlook remains for the new year. Here's Marketplace's Jeremy Hobson.


Jeremy Hobson: The International Air Transport Association -- or IATA for short -- says demand is starting to come back. But the industry is facing a $5.6 billion loss next year. Compare that to a loss of $11 billion this year.

Steve Lott: We're seeing demand return, but the question is what are the fares that people are paying? And then what are the costs looking like for the airline industry?

Steve Lott is a spokesman for IATA. He says airlines slashed prices when the recession began and haven't been able to jack them back up again. Now, Lott says the concern is that as demand returns, so will high fuel costs.

Lott: For 2010, we're predicting an average oil price of about $75 per barrel, which is up considerably from about $62 average expected for 2008.

Lott says there is one bright spot in the report: Latin America. It's expected to be the only profitable region of the world's airline industry next year.

In New York, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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