Airlines may report combined losses of $6.1 billion this year, the worst since 2003, as spiraling fuel costs and slowing economies wipe out earnings.
The International Air Transport Association, whose members account for 93 percent of international traffic, revised its forecast for the fourth time in nine months at a meeting in Istanbul, Turkey, after oil prices rose 42 percent in six months. Airlines had a profit of $5.6 billion in 2007, the first since the 2001 terrorist attacks.
“Just as we start to recover, we face another crisis of potentially even greater dimension,” IATA chief executive Giovanni Bisignani said at Monday’s annual meeting. “Skyrocketing oil prices are changing everything. The situation is desperate and potentially more destructive than our recent battles with all the horsemen of the apocalypse combined.”
More than a dozen carriers have collapsed in the past six months, with United Kingdom-based business-class operator Silverjet Plc the latest casualty, grounding planes last week after running out of cash. Frontier Airlines Holdings Inc. of Denver, long-haul budget carrier Oasis Hong Kong Airlines Ltd. and Columbus, Ohio-based Skybus Airlines Inc. also failed in recent weeks.
Bisignani said the surge in fuel expenses has combined with slowing demand after the tightening of global credit to create a “perfect storm.” The group forecast a $4.5 billion profit as recently as April 1.
IATA based its $6.1 billion loss estimate on an oil price of about $135 a barrel, equal to the record level reached May 22. The 230-member group’s official forecast is for a loss of $2.3 billion, based on a consensus oil price of $107.
“This really reflects the whole state of the industry,” said John Strickland, director of aviation specialist JLS Consulting Ltd. in London. “It shows the way in which the industry can rapidly turn from profit to loss. If you look at some of the other forecasts of oil at $200 a barrel, then I think it’s more likely to be worse than IATA’s projections.”
Airline losses since the Sept. 11, 2001, strikes on New York and Washington have totaled more than $36 billion, led by a $13 billion deficit the year of the attacks. The loss in 2003 was $7.5 billion.
