Airlines could face losses of $6.1bn
Airlines are in a "desperate" situation and face global losses of $6.1bn (Dh22bn) this year if oil prices hold above $135 a barrel, a top industry player has warned.
Giovanni Bisignani, chief executive of the International Air Transport Association, offered the stark verdict at the organisation's annual meeting in Istanbul yesterday, where industry chiefs are debating how best to tackle soaring fuel costs.
"After enormous efficiency gains since 2001 there is no fat left and skyrocketing oil prices are changing everything," said Bisignani.
"For every dollar the price of oil goes up, costs go up by $1.6bn. The situation is desperate – 24 airlines went bust in the last six months. Airlines are struggling for survival and massive changes are needed."
This decade has been hard on the airline industry, with the September 11 terrorist attacks, the SARS virus and now rising fuel costs taking their toll on the collective bottom line.
Indeed, 2007 was the first year since 2000 that the industry made a profit. This totalled $5.6bn, which is a margin of just 1.6 per cent.
Bisignani warned even if oil prices fell to an average of $107 per barrel in 2008, this would still leave the industry facing losses of $2.3bn.
Meanwhile, the current economic woes of the United States will lead to slowing traffic growth, which will increase by 3.9 per cent this year, compared to 5.9 per cent in 2007.
Bisignani also slammed current airline security measures as an "unco-ordinated mess", saying airlines and their customers had paid more than $30bn for security measures since 2001.
"For this we get more frustration than value," said Bisignani. "We are pushed back because fear drives decisions. The infrastructure cannot cope – governments are not co-operating and nobody is taking leadership. Passengers are suffering because they face a maze of duplication, bureaucracy and hassle."
Government legislators also attracted Bisignani's ire, claiming extra taxes and regulations were counterproductive in an industry that has improved fuel efficiency by 19 per cent since 2001.
"With oil at $130 a barrel, we have the biggest incentive of any industry to improve environmental performance," he said. "Governments fail to understand this, they remain fixed on punitive measures.
"We have had enough of governments that talk green and quickly take the cash, but don't deliver results."
The airline industry must be allowed to liberalise to survive in today's tough economic climate, Bisignani said, warning that monopoly players were using an unfair playing field.
Giovanni Bisignani, chief executive of the International Air Transport Association, offered the stark verdict at the organisation's annual meeting in Istanbul yesterday, where industry chiefs are debating how best to tackle soaring fuel costs.
"After enormous efficiency gains since 2001 there is no fat left and skyrocketing oil prices are changing everything," said Bisignani.
"For every dollar the price of oil goes up, costs go up by $1.6bn. The situation is desperate – 24 airlines went bust in the last six months. Airlines are struggling for survival and massive changes are needed."
This decade has been hard on the airline industry, with the September 11 terrorist attacks, the SARS virus and now rising fuel costs taking their toll on the collective bottom line.
Indeed, 2007 was the first year since 2000 that the industry made a profit. This totalled $5.6bn, which is a margin of just 1.6 per cent.
Bisignani warned even if oil prices fell to an average of $107 per barrel in 2008, this would still leave the industry facing losses of $2.3bn.
Meanwhile, the current economic woes of the United States will lead to slowing traffic growth, which will increase by 3.9 per cent this year, compared to 5.9 per cent in 2007.
Bisignani also slammed current airline security measures as an "unco-ordinated mess", saying airlines and their customers had paid more than $30bn for security measures since 2001.
"For this we get more frustration than value," said Bisignani. "We are pushed back because fear drives decisions. The infrastructure cannot cope – governments are not co-operating and nobody is taking leadership. Passengers are suffering because they face a maze of duplication, bureaucracy and hassle."
Government legislators also attracted Bisignani's ire, claiming extra taxes and regulations were counterproductive in an industry that has improved fuel efficiency by 19 per cent since 2001.
"With oil at $130 a barrel, we have the biggest incentive of any industry to improve environmental performance," he said. "Governments fail to understand this, they remain fixed on punitive measures.
"We have had enough of governments that talk green and quickly take the cash, but don't deliver results."
The airline industry must be allowed to liberalise to survive in today's tough economic climate, Bisignani said, warning that monopoly players were using an unfair playing field.
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