Airlines braced for £1bn losses from oil price rise

The world’s airlines will collectively lose more than £1bn (€1.3bn) this year because of rocketing fuel prices, experts forecast today.

The estimate from the International Air Transport Association (Iata), which represents more than 240 airlines, was down from a projected profit of more than £2bn (€2.5bn) it announced in March. It was the second time Iata has lowered its forecast this year.

The forecast uses a consensus oil price of US$106.50 per barrel of crude, up from the US$86 per barrel used in the March forecast, Iata said.

“For every dollar that the price of fuel increases, our costs go up by US$1.6bn,” said Giovanni Bisignani, Iata director general and chief executive.

He spoke at the group’s annual meeting and World Air Transport Summit which opened in Istanbul today.

The total fuel cost for the airline industry this year is expected to be US$176bn – just over a third of the operating cost, Iata said.

This is a US$40bn increase compared with the 2006 bill.

“The situation has changed dramatically in recent weeks,” Mr Bisignani said. “Oil skyrocketing above US$130 per barrel has brought us into uncharted territory.”

Mr Bisignani also slammed airport services in Britain as overpriced and poorly performing.

“This year’s Worst Regulator Award goes to the UK Civil Aviation Authority,” he said. “Look at Heathrow. Service levels are a national embarrassment but still the CAA increased charges by 50% over the last five years and plan 86% for the next five.”

“That only happens in monopoly-land,” he added.

Governments should get serious about the crisis, Mr Bisignani said.

“Effective regulation means delivering results on cost-efficiency and good service, not a license to print money and abuse monopoly powers,” he added.