Airline industry struggles with falling profits
by brian_turner
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The director general of the International Air Transport Association told the annual meeting of his organization on Monday that high oil prices are “destroying†the profitability of airlines worldwide.
Fuel costs, which have risen by $39 billion in two years, are around 22 percent of the industry’s costs. The industry’s total fuel bill is expected to rise from $61 billion in 2004 to $83 billion this year.
Non-fuel costs, on the other hand, have been falling by 2 to 3 percent per year and are expected to fall by 4.5 percent this year., while passenger traffic is expected to rise 5.4 percent this year.
US airlines have been suffering most from the high fuel prices due to their inability to hedge fuel needs very much because of their poor financial shape and low credit ratings.
US companies’ net losses were $9.1 billion in 2004, against profits of $2.6 billion by Asian Pacific carriers and $1.4 billion in profits for European carriers in the same period.
The non-US carriers were helped somewhat by the weakness of the US dollar.
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