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Global airline industry losses will widen 25 percent this year to a record US$6 billion, worse than expected, as fuel and wage bills surge, the International Air Transport Association said.
Airlines' fuel bills will rise 31 percent to a total US$83 billion this year, based on an average price of US$47 a barrel for Brent crude oil, IATA Director-General Giovanni Bisignani said at a conference yesterday in Tokyo. Combined losses will be 9 percent more than the US$5.5 billion Geneva-based IATA forecast last month.
The US$400 billion global aviation industry lost more than US$36 billion between 2001 and 2004, led by US carriers including UAL Corp's United Airlines, because of terrorism, Asia's SARS outbreak and record fuel prices. United Airlines and its biggest rivals are trying to persuade labor unions to accept wage and benefit cuts to restore profits. Some carriers are also adding oil surcharges to their fares to protect earnings.
"There's a limit as to how airlines can increase their fuel surcharges," said Mark Tan, a strategist at UOB Asset Management Ltd in Singapore, which owns shares of Singapore Airlines Ltd and Thai Airways International Pcl among US$3.5 billion of Asian equities under management. Airlines have not been able to fully cover their costs with surcharges, Tan said.
The price of jet fuel, which makes up between 15 percent and 40 percent of an airline's operating costs, surged as much as 70 percent last year.
Brent crude oil for July delivery was trading at US$50.70 a barrel on May 27 on London's International Petroleum Exchange, where it reached a record US$57.65 a barrel on April 4. The price of jet fuel has surged 88 percent in the past three years, and the industry's oil expenses have doubled, IATA said.
The price of Brent crude oil may remain at about US$50 a barrel this year, "with potential to the upside greater than the downside," said the industry-funded group. The likelihood of the oil price falling below US$40 per barrel is remote, IATA said.
Airlines were profitable in Asia, Europe and the Middle East, with South American carriers "near break even" last year, said IATA's Bisignani.
North American carriers together lost US$9 billion last year as labor costs were high and low-fare competition drove down fares, he said. United Airlines, the world's second-largest carrier, has been in bankruptcy court since May 11.
Air Canada, the nation's largest airline, reported a smaller first-quarter loss of C$77 million (US$61.2 million), after emerging from bankruptcy last October.
African airlines lost more than US$150 million last year, IATA said. Middle Eastern airlines such as Emirates, based in the United Arab Emirates, made US$100 million of net income on higher travel demand, he said.
Asian carriers recorded US$2.6 billion in combined profit last year, boosted by strong growth in China and lower labor costs, the group said.
Singapore Airlines, Asia's most profitable carrier, posted a fourth-quarter profit of S$297.8 million (US$181 million), beating analysts' expectations by about 36 per cent.
(China Daily June 1, 2005)
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