IATA Forcasts Higher Airline Losses

The International Air Transport Association (IATA) revised its industry financial forecast for 2008 down to a loss of $2.3 billion, blaming high oil costs. IATA’s forecast uses a consensus oil price of $106.5 per barrel. This is a swing of $6.8 billion from the previously forecast industry profit of $4.5 billion that was announced in March, IATA said.

“For every dollar that the price of fuel increases, our costs go up by $1.6 billion,” said Giovanni Bisignani, IATA director general and CEO at IATA’s 64th Annual General Meeting in Istanbul. The industry’s total fuel bill in 2008 is expected to be $176 billion accounting for 34 percent of operating costs. This is $40 billion more than the 2006 bill, which was $136 billion (29 percent of operating costs).  In 2002, the bill was $40 billion, equal to 13 percent of costs.

Bisignani also said the airline industry faced tough times. “Over the past 60 years the industry made $11.5 trillion in revenues, but only $32 billion in profits," he said. "Since 2001, airlines achieved massive change. Fuel efficiency improved 19 percent and non-fuel unit costs dropped 18 percent. The skyrocketing price of oil has eaten these gains and left the industry in the red again. Oil prices at $130 a barrel are changing the game for everyone. The situation is grim."

Bisignani also sounded the alarm to governments, industry partners and labor. “Airlines are struggling for survival and massive changes are needed," he said. "Governments must stop crazy taxation, change the rules of the game and fix the infrastructure. Labor must understand that jobs disappear if costs don’t come down. And to our partners, the message is simple. We are in this together. Don’t bite the hand that feeds you.” Visit www.iata.org.

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