The toxic combination of high oil prices and declining demand will result in a total loss of $5.2 billion for airlines this year, warned the global airline association IATA.
Although the latest projection, based on an average oil price of $113 per barrel and $140 for jet fuel, is lower than the initial forecast of losses amounting to $6.1 billion, the association’s director general Giovanni Bisignani warned that the situation remains bleak. "The toxic combination of high oil prices and declining demand continues to erode the profitability of the industry," he said. The price of crude oil is now $40 higher than the 2007 average of $73 per barrel, meaning that the airline industry will have to allocate about $186 billion for fuel in 2008, Bisignani emphasized.
IATA estimates that North American companies will be the hardest hit, with expected losses of $5 billion in 2008. European airlines are still in the black, but on the edge, with an expected profit drop to $300 million from $2.1 billion in 2007. Similarly, profits for Asia-Pacific airlines are expected to fall to $300 million from the previous $900 million. IATA also warned of a slowdown in passenger demand growth for air transport services in July to 1.9 percent, the lowest level in five years. (H)
