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The Honolulu Advertiser
Posted on: Tuesday, June 3, 2008

Airlines expected to lose $2.3 billion

Associated Press

GENEVA The airline industry will lose $2.3 billion this year because of hikes in oil prices, the world airlines group said yesterday, revising its earlier forecast of a collective industry profit.

The loss forecast by the International Air Transport Association, which represents more than 240 airlines around the world, contrasted with a projected profit of $4.5 billion announced in March.

It was the second time IATA has lowered its forecast this year.

The forecast uses a consensus oil price of $106.50 per barrel of crude, up from the $86 per barrel used in the March forecast, IATA said.

"For every dollar that the price of fuel increases, our costs go up by $1.6 billion," said Giovanni Bisignani, IATA director general and chief executive.

The front-month contract for oil was trading at about $126 a barrel in electronic trading yesterday, down from a record $135.09 set May 22 on the New York Mercantile Exchange.

Bisignani spoke at the group's annual meeting and World Air Transport Summit which opened in Istanbul, Turkey.

The total fuel cost for the airline industry this year is expected to be $176 billion 34 percent of the operating cost, IATA said. This is a $40 billion increase compared with the 2006 bill.

"The situation has changed dramatically in recent weeks," Bisignani said. "Oil skyrocketing above $130 per barrel has brought us into uncharted territory."

Governments should get serious about the crisis, Bisignani said.

"Effective regulation means delivering results on cost-efficiency and good service, not a license to print money and abuse monopoly powers," he added.