World’s airlines face loss if oil stays at $135

Source: Exec Digital UK

Date :03/06/2008 09:15:30

The International Air Transport Association (IATA) has downgraded its forecast this year for the third time and is now predicting losses of $2.3 billion (£1.1 billion) due to sustained oil prices.

The IATA said that if the price of oil stayed at $135 a barrel, losses could be $6.1 billion.

Fuel bill

“For every dollar that the price of fuel increases, our costs go up by $1.6 billion,” Giovanni Bisignani, IATA Director General and CEO said at the annual IATA conference which opened in Turkey yesterday.

The industry’s total fuel bill in 2008 is expected to be $176 billion (based on oil at US$106.5 per barrel) accounting for 34 percent of operating costs, the IATA said in a statement yesterday. This is US$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.

“To survive this crisis, even more massive changes will be needed quickly,” Mr. Bisignani said, adding that Governments, industry partners and labour are the ones who must deliver change.

Breakeven

The IATA’s warning comes as carriers struggle with rising fuel costs.

On Tuesday Ryanair, Europe’s biggest low-cost airline, said full-year net profit fell ten percent to €390.7 million, down from €435.6 million the previous year due to fuel costs and the write down of the value of a stake in former Irish State airline Aer Lingus.

The Irish carrier also warned that if oil prices remain at $130 per barrel it would only breakeven in 2009.

Meanwhile the business-class airline Silverjet said Friday it had suspended operations and entered administration after running into serious funding problems amid soaring fuel costs.

June 03, 2008