Fuel costs hit airlines

24-08-2006

Exorbitant oil prices are expected to increase the fuel bill of world airlines by $21 billion this year, leaving the industry with a net loss for the sixth year running, according to lobby group the International Air Transport Association (IATA).

The IATA represents 261 airlines handling 94 per cent of the world's scheduled air traffic.

Giovanni Bisignani, IATA chief executive, yesterday told the group's annual meeting in Paris that the airline fuel bill could total more than $112 billion (£60 billion) this year, if the average price of Brent crude oil remained at $66 a barrel.

Although global losses could stand at $3 billion (£1.6 billion) in 2006 from $2.2 billion on 2005, he added airlines could return to profit in 2007 if oil prices steadied.

Fuel accounts for over a quarter of the industry's total operating costs.

"Oil is the wild card. Prices are racing ahead of efficiency gains and robbing our profitability," Mr Bisignani said in his speech to the World Air Transport Summit.

Helping to buffer the heavy losses, Mr Bisignani pinpointed a ten per cent increase in global revenue in the last three years as well as the impact of cost-cutting measures.

But he slammed oil firms for massive profit taking without improving services.

On the environment, he said the industry had saved 11.9 million tonnes of CO2 emissions and $2.4 billion but could do much more.

It was also a myth, he said, to insist air transport was a major cause of global warming as it only made up two per cent of CO2 emissions but supported eight per cent of GDP.

Oil prices headed over $73 a barrel on Monday amid fears that Iran may halt supplies to the West.



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