Airlines to lose nearly $10B by 2010: IATA

The world's airlines will lose almost $10 billion US by 2010 because of higher fuel prices, according to a new study by the International Air Transport Association.

On Tuesday, the organization that represents the majority of the world's big air carriers said that gas prices 55 per cent higher than last year's average mean the sector will lose money this year and in 2009.

Thus, what was a $5.6 billion profit for the sector worldwide in 2007 will become a $5.2 billion loss in 2008 and a $4.3 billion loss next year, according to IATA.

World airlines are expected to lose almost $10B US in next two years.(Canadian Press)

"The situation remains bleak. The toxic combination of high oil prices and falling demand continues to poison the industry’s profitability,” said Giovanni Bisignani, IATA’s director general and CEO, in a press release.

If correct, that means the world's air industry will lose money in eight out of the nine years between 2001 and 2010.

The organization said that, even with the recent slide in oil prices, aviation fuel still costs approximately $40 a barrel more than last year, when it was selling for $73.

As a result, fuel will make up approximately 35 per cent of the sector's total operating costs this year and could approach 40 per cent in 2009. In 2002, it was 13 per cent of operating costs.

Worse still, in July, fewer passenger flew than expected because of higher ticket prices and a slowing economy, IATA said. In that month, only 1.9 per cent more people flew compared to the same month last year, the lowest increase in five years.

The industry's weaker economics will act as a drag on the airlines' bottom lines, IATA noted.

For example, the organization is predicting that 28 major carriers will make money in the second quarter of 2008, but a lot less than at the same time last year, $236 million this year versus $8.4 billion for the same three months of 2007.

The situation is even darker for airlines in the U.S., IATA said, where the 10 major carriers will lose $784 million in the second three months of the year compared to a profit of $5.1 billion one year earlier.

IATA has been a major proponent of reduced airport fees for its members and a fierce critic of airline taxes, especially levies designed to cut fuel consumption, arguing that taxes do not actually cut harmful emissions.

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