Airlines project US$6bn losses this year

The global airline industry said yesterday that its losses would mount to US$6 billion this year as high fuel prices and soaring costs in North America outpace expansion in Asia and predicted more consolidation.

Opening two-day meeting in Tokyo, the International Air Transport Association (IATA) called on governments to pursue business-friendly policies and lashed out at a French-German proposal to tax air tickets to aid the developing world.

IATA it has done its part to adapt after the Sept. 11, 2001 attacks shook up global air travel. It said it has slashed costs and last year saw its safest year with only 428 people killed in commercial air crashes.

"Losses between 2001 and 2004 exceeded US$36 billion. And we will lose another US$6 billion this year," IATA director-general Giovanni Bisignani told the opening of the meeting attended by 265 firms.

IATA, which represents 95 percent of the world's air carriers, had previously estimated losses for this year at US$5.5 billion.

"Parts of the industry are profitable. But the margins are not acceptable for a US$400 billion industry. Urgent action and change are needed," Bisignani said.

IATA to slash costs including the complete replacement of paper tickets with electronic ones by 2007.

Air France chairman and chief executive Jean-Cyril Spinetta said high energy costs would accelerate consolidation of the industry.

"One of the problems for our industry is too easy access to the market," Spinetta said, whose airline has merged with Dutch carrier KLM.

Spinetta regulators had been pushing to let newcomers into the airline industry without fully considering the implications.

"Consolidation is the future, it's a must," Bisignani said separately.

Bisignani the price of fuel "the fifth horseman of the apocalypse," saying the industry's expected fuel bill this year was US$83 billion.

Non-fuel were forecast to drop by 4.5 percent this year, said Bisignani, who lamented that the aviation industry had in the past been "too weak with labor."

The success story of the industry has been Asia, where airlines posted US$2.6 billion in profit last year.

"Strong growth fueled by China and low labor costs are the competitive advantage" in Asia, Bisignani said.

He said India, which has seen a nascent fare-cutting war to encourage air traffic, "may be the next great market for the industry."

European also posted a profit of US$1.4 billion last year with better passenger flows and industry consolidation.

But IATA said the biggest obstacle to the aviation industry's growth was North America, whose airlines posted total losses of US$9 billion last year.

Bisignani North America's labor costs and airport taxes were too high and that low-cost carrier competition was eating into profits.