Montreal – Commercial airlines are on course to lose billions of dollars again this year, due chiefly to surging oil prices, high labor costs and ownership restrictions, the head of the world’s largest airline industry organization said recently.
“Airlines will spend $34 billion more for fuel this year than last, and about $1.4 billion of that will make its way to the bottom line. That will drive losses to $7.4 billion for 2005,” said Giovanni Bisignani, director-general and chief executive of the International Air Transport Association, an airline lobbying and technical support organization with 270 member airlines.
The projection, based on a post-Hurricane Katrina survey of oil prices and financial input from the association’s members, is up substantially from an already-awful $5 billion prediction made earlier this year. This will mark the fifth straight money-losing year for the world’s airlines.
“We have lost $36 billion in the last four years,” Bisignani said. “After $36 billion, $7.4 billion is a nightmare.”
The association estimates U.S. airlines will lose $8 billion this year, offsetting profits by Asian carriers and a break-even performance by European airlines.
Bisignani, chief executive at Alitalia in the 1980s and ’90s, also acknowledges that the airline industry suffers from some self-inflicted wounds: “We were fast to pay very high salaries (to pilots and others). We were slow to use the Internet.”
Now, he said, the world’s airline industry is shaping up. He praised United Airlines, the bankrupt carrier that dominates Denver International Airport.
“United is doing a good job” in Chapter 11, he said, and doing what other major carriers have to do: shrinking its workforce; squeezing concessions out of employees, vendors and creditors; and trying to make itself into a lean, profitable company.
Airlines, he said, have also made great strides in passenger safety. The world’s airlines, he said, recorded about the same number of fatalities in 2004, when they carried 1.8 billion passengers, as they did in 1946, when they carried just 9 million.
Despite aviation’s travails, Bis ignani said, the industry is continuing to expand rapidly, led by growth in China and India.
