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Airlines Are Seen Losing Up to $4 Billion This Year

September 28, 2004|From Reuters

The global airline industry stands to incur losses of $3 billion to $4 billion this year as surging oil prices wipe out any hope of profit created by rising passenger traffic, the International Air Transport Assn. said Monday.

IATA expects domestic and international airlines to spend $10 billion more on fuel than forecast this year, a 25% increase that comes as carriers remain weakened by three years of crises.

"This will create tension in the industry because after $30 billion [of losses], another year with a loss between $3 billion and $4 billion is very, very dramatic," Giovanni Bisignani, IATA director general and chief executive, said.

As recently as two months ago, Bisignani expected the industry could break even or post a small profit this year.

The head of Montreal-based IATA said carriers can pass along only a fraction of the extra costs to passengers because overcapacity in the industry is keeping downward pressure on prices.

The increase in fuel prices comes as airlines still are recovering from a series of setbacks, including the Sept. 11, 2001, attacks on the United States, the SARS outbreak in Asia and the war in Iraq.

World air passenger traffic rose 18.7% in the first eight months of the year while cargo movements increased 14.2%, IATA said.

However, compared with 2000, the year before the suicide hijackings in the United States sent the industry into crisis, passenger traffic was only 8.4% higher from January to August.

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