Airline industry forecasts $6b loss this year

TOKYO — The global airline industry said yesterday its losses would mount to six billion dollars this year and predicted more consolidation as high fuel prices and soaring costs in North America outpace growth in Asia.

By (AFP)

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Published: Tue 31 May 2005, 10:30 AM

Last updated: Thu 2 Apr 2015, 5:12 PM

Meeting in Tokyo, the International Air Transport Association (IATA) called on governments to pursue business-friendly policies and lashed out at a French-German proposal to tax air tickets to aide the developing world.

IATA said it has done its part to adapt after the September 11, 2001 terrorist attacks shook up global air travel. It said it had slashed costs and that last year saw its safest year, with only 428 people killed in commercial air crashes.

“Losses between 2001 and 2004 exceeded $36 billion,” IATA director-general Giovanni Bisignani told the opening of the meeting attended by 265 companies. “And we will lose another six billion dollars this year.”

IATA, which represents 95 per cent of the world’s air carriers, had previously estimated losses for 2005 at 5.5 billion dollars.

“Parts of the industry are profitable,” Bisignani said. “But the margins are not acceptable for a 400 billion-dollar industry. Urgent action and change are needed.”

IATA plans to slash costs, including through the complete replacement of paper tickets with electronic ones by 2007.

Air France chairman and chief executive Jean-Cyril Spinetta said high energy costs would accelerate consolidation of the industry.

“One of the problems for our industry is too-easy access to the market,” Spinetta said, whose airline has merged with Dutch carrier KLM.

Spinetta said regulators had been pushing to let newcomers into the airline industry without fully considering the implications. “Consolidation is the future,

it’s a must,” Bisignani said separately.

Robert Milton, chairman of Air Canada, which emerged from bankruptcy protection last year, said airlines needed to band together to fight government policies that can distort the market.

“Only when we speak with one voice and with will, will there be the potential to break through some of the abuse,” Milton said. One of the few to break the chorus of complaint about governments was Tim Clark, president of Emirates airline, which has faced allegations from rivals of subsidisation.

“In the end you just need to solve your own problem... and get more efficient,” Clark said.

For Wolfgang Mayrhuber, chief executive of Lufthansa, the key is to focus on fast-diversifying customer needs.

“We need to be a full-fledged service supplier,” he told a panel discussion.

One point on which there was unanimity was the price of fuel, which Bisignani called “the fifth horseman of the apocalypse”.

Bisignani said the industry’s expected fuel bill this year would be 83 billion dollars, while non-fuel costs were forecast to drop by 4.5 per cent.

The success story of the industry has been Asia, where airlines posted $2.6 billion in profit last year.

“Strong growth fuelled by China and low labour costs are the competitive advantage” in Asia, Bisignani said.

He said India, which has seen a nascent fare-cutting war to encourage air traffic, “may be the next great market for the industry”.

European airlines also posted a profit, of 1.4 billion dollars, last year with better passenger flows and industry consolidation.

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