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Last Updated: Monday, 7 June, 2004, 06:34 GMT 07:34 UK
Oil prices to hit airline profits
Indonesian low-cost airlines
Airlines had been hoping for better times in 2004
Surging oil prices could dash the air travel industry's hopes of turning a profit in 2004 after three years of steep losses, a conference has heard.

International Air Travel Association (IATA) chief Giovanni Bisignani said high fuel costs could push the industry into the red yet again.

He told IATA's annual meeting that its earlier forecasts looked optimistic.

"Our projections of a $3bn profit were based on an average oil price of $30 a barrel," he said.

"If oil prices average $33, we break even. At $36, we could expect three billion dollar losses."

So far this year, average world oil prices are up by 30% compared with 2003, lifted by surging demand, supply bottlenecks at US refineries, and fears that conflict in the Middle East could disrupt supplies.

Light sweet crude for July delivery - the benchmark for US oil prices - was trading at $38.36 on Monday morning, having touched record highs of over $42 last week.

Apocalyptic warning

Mr Bisignani described this year's jump in oil prices as the airline industry's "fifth horseman of the apocalypse."

High fuel prices could cut profits by 4m

"Last year, we survived the four horsemen of the apocalypse - SARS, conflict in Iraq, terrorism, and the (depressed) economy."

"But a fifth horseman, the price of oil, could add up to $1bn per month to our costs, and deny us profitability yet again."

The airline sector has faced the most turbulent period in its history over the last three years, racking up accumulated losses of about $30bn, according to IATA.

The slump began with a steep fall in passenger numbers in the wake of the 11 September attacks, and has been prolonged by the Iraq war and the outbreak of the deadly Sars virus.

According to IATA figures, passenger numbers fell for the third consecutive year in 2003, dipping by 0.6% compared with 2002.

The air travel slump has forced several global airlines into bankruptcy, and many others have been saved from collapse only by government assistance.

IATA has recommended that airlines levy a surcharge on intercontinental flights to offset higher fuel costs.

Many leading carriers, including British Airways, Singapore Airlines, and Australia's Qantas, have already done so.

IATA members attending its annual conference in Singapore also agreed to introduce full electronic ticketing by 2007 as a cost-cutting measure.

IATA represents more than 270 airlines accounting for 98% of international scheduled air traffic.

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