Airlines to Lose Less, Says IATA
By Steve Creedy, The Australian | Sep. 01, 2006
The International Air Transport Association (IATA) has almost halved its previous estimates of how much money the global industry will lose this year after stronger than anticipated economic growth boosted airline revenues and passenger loads.
IATA now estimates international airlines will lose $US1.7 billion ($2.24 billion), down from $US3 billion in its previous estimate, with a fuel bill of $US115 billion based on an average oil price of $US68 a barrel.
This compares with last year's loss of $US3.2 billion with a fuel bill of $US91billion.IATA attributed the result to better than expected economic growth and restructuring efforts by airlines that had elevated load factors to record levels.
"We are still in the red but what other industry could add $US24 billion to its second largest cost and still improve the botton line," IATA director Giovanni Bisignani said.
"Efficiency, hard work and a strong revenue environment have all contributed to this amazing result."
The global result was again dragged down by North America, which recorded losses of $US4.5 billion.
However, it is expected to return to operating profitability this year as restructuring cuts non-fuel costs, raises load factors and boosts yields.
Asian airlines lost some ground but are still expected to make a $US1.7 billion profit.
"Lower hedging levels than European counterparts meant more exposure to the rising price of fuel," Mr Bisignani said.
"At the same time, the rapid development of low cost airlines is negatively impacting yields on some key regional routes."
European airlines' profits are expected to rise to $US1.8 billion as a strong European economy prompts strong growth in premium traffic.
The Europeans are also benefiting from double-digit growth in Asia-Europe markets.
In the first seven months of 2006, international passenger traffic grew by 6.4percent and cargo by 5.3 per cent.
Airlines are more carefully managing capacity, filling an average of 76 per cent of their seats over the same period.
The Asia-Pacific figures were slightly below the average at 5.8 per cent for passenger traffic and 5.2 per cent for cargo with 74.4 per cent of seats filled.
Mr Bisignani said the strong revenue environment had contributed significantly to the improved results.
But he warned that the long-term effect of terrorism and instability in the Middle East had yet to be calculated.
"The improvement is based as much on efficiency as strong revenues, as a US-led economic slowdown is the major threat to profitability," he said.