Airline industry in quandary over rising fuel costs

5th June 2006, Comments 0 comments

PARIS, June 4, 2006 (AFP) - Representatives from the world airline industry, facing larger-than-expected financial losses this year, are to convene here Monday and Tuesday to confront the challenge posed by rising oil prices.

PARIS, June 4, 2006 (AFP) - Representatives from the world airline industry, facing larger-than-expected financial losses this year, are to convene here Monday and Tuesday to confront the challenge posed by rising oil prices.

The International Air Transport Association (IATA) is forecasting a near-10 percent spike in fuel bills in 2006 to more than US $100 billion dollars (EUR 780 million) after a doubling of fuel costs in 2005.

The association, grouping 265 airlines accounting for 94 percent of international air traffic, currently foresees industry losses totalling US $2.2 billion this year.

But IATA Director General Giovanni Bisignani warned last week that the shortfall could be greater than anticipated, notably as the average price per barrel of oil is expected to be US $64 in 2006 against US $54 in 2005.

Airlines lost a total of US $6 billion in 2005.

Bisignani said that returning to profit in 2007, as the industry hopes to do, will depend on the price of oil.

The estimated 800 delegates expected here this week are therefore expected to consider further cost-cutting measures at their two-day annual general assembly.

Companies have managed to lower non-fuel related operating costs by 13 percent in the last five years. But they nonetheless remain under pressure to improve capacity utilization and to consider surcharges on ticket prices, which according to Bisignani could add 15 to 20 percent to the cost of a ticket.

He added that measures to improve efficiency and increase passenger loads would figure prominently at the Paris session.

Eliminating paper tickets and replacing them with electronic ticketing, a step expected to be taken in 2007, could save the industry US $3.5 billion a year, Bisignani said.

In addition, greater use of electronic passenger registration and baggage handling could result in reduced workforces and lower costs. Other measures under consideration call for shorter flight routes and more fuel-efficient aircraft.

"Given the level of oil prices, and the feeling in the market that they will not come down, the choices of planes that airlines make in the future will above all be determined by fuel consumption," Air France-KLM chairman Jean-Cyril Spinetta said recently.

IATA members are also expected to maintain pressure for lower airport charges, which account for 10 to 12 percent of the costs carried by the industry, according to Bisignani.

In remarks here last week he noted that charges imposed by Paris airport operator ADP are programmed to increase by five percent a year until 2010, making airports in the French capital among the most expensive in the world.

Copyright AFP

Subject: French news

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