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Soaring costs keep airline profits on the ground

Soaring costs keep airline profits on the ground
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The International Air Transport Association has warned that airlines are facing a desperate situation, and losses appear to be inevitable this year. IATA represents 240 airlines responsible for 94 per cent of the world’s air-traffic.

At an meeting in Istanbul, the director general Giovanni Bisignani said the US economic slowdown and sky-high fuel prices are conspiring to hit the industry with what he called “the perfect storm.” Bisignani forecast grey-skies ahead.

If the price of oil falls to, and stays at 107 dollars a barrel, he said airlines would lose one and a half billion euros. But if it maintains a level of 135 dollars – which it hit in May, losses worldwide would be 3.6 billion euros.

The gloom was deepened with forecasts that the economic slowdown will also cut the number of people flying, hitting traffic growth. And the organisation that increased liberalisation would intensify competition, further squeezing profitability.

Bisignani said conditions are potentially more destructive than what he called the industry’s battles with all the horsemen of the apocalypse combined.