"IATA Now Sees Airline Industry Making $7.4 Billion Loss In 2005"

Monday, September 12, 2005

IATA Now Sees Airline Industry Making $7.4 Billion Loss In 2005  


LONDON -(Dow Jones)- The International Air Transport Association, or IATA,
said Monday that it's now forecasting a loss of $7.4 billion for the global
airline industry this year in light of rising oil prices.

In May, IATA had forecast a loss of $6.0 billion based on an average oil
price over the year of $47 a barrel. The latest forecast is based on an
average oil price of $57 a barrel.

"Oil is once again robbing the industry of a return to profitability. Each
dollar added to the price of a barrel of oil adds $1 billion in costs to the
industry. Cost reduction and efficiency gains have never been more
critical," said Giovanni Bisignani, IATA's Director General and CEO.

"Buried in the industry's red ink, there is an incredible story to be told.
Despite adding $10 billion to our cost estimates, the incremental impact on
the bottom line has been limited to $1.4 billion. The airline battle to
reduce costs, increase yields and improve efficiencies is effective
well-beyond expectations," said Bisignani.

The regional profitability picture is mixed. While European airlines are
expected to break even and Asia Pacific carriers will make in the range of
$1 billion, losses by North American carriers could exceed $8 billion, IATA
said.

The industry fuel bill rose from $44 billion in 2003 (at an average price of
$ 29/barrel of Brent oil) to $63 billion in 2004. At US$57 per barrel, the
industry fuel bill for 2005 will top $97 billion. "With a total industry
turnover in the range of $400 billion per year, a fuel bill of $97 billion
makes up 25% of our total costs. In less than two years the total bill has
more than doubled," Bisignani.


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