News

Massive losses forecast for world's airlines ...

THE INTERNATIONAL AIR Transport Association (IATA) has revised its 2008 profits forecast downwards by US$6.8 billion - and even that may prove to be over-optimistic.

Earlier this year, IATA predicted the world's airlines would between them turn in a profit of US$4.5 billion. Last month the organisation forecast a loss of US$2.3 billion. That latest figure, however, is based on oil prices over the year averaging US$106.5 a barrel.

Last month it was nudging US$140 a barrel, and Iran's representative at the Organisation of Petroleum Exporting Countries (OPEC), Mohammad Ali Khatabi, told energy ministers from the G8 group he expected that to rise to US$150 per barrel this summer.

Already this year, more than 20 airlines have ceased trading - mostly as a direct result of the fuel cost burden.

"Many more will not survive," IATA chairman Fernando Pinto, chief executive of TAP Air Portugal, has warned.

Pinto went on to say: "Extraordinary times call for extraordinary measures. Airlines are an engine for global prosperity and failure amongst them would send shock-waves throughout the world economy."

In the US, a study by AirlineForecasts and the Business Travel Coalition warns that several US carriers will be unable to pay their bills by the end of this year. Even with oil at just US$130 a barrel, airline costs will go up by US$30 billion, while they will only be able to generate US$4 billion in fare increases and incremental fees.

"If oil prices stay anywhere near US$130 per barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009," the report warns. "US commercial aviation is in full-blown crisis and heading toward a catastrophe."