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Airlines worldwide to lose $ 2.2 billion in '06

Written by: Staff

New Delhi, Mar 27 (UNI) The International Air Transport Association (IATA) has said that it expects airlines globally to lose 2.2 billion dollars this year and to post profits of 7.2 billion dollars next year.

The quarterly revision is a significant improvement on the previous forecast of a 4.3 billion dollar loss in 2006 and a profit of 6 billion dollars in 2007.

''There is a new optimism emerging in the industry,'' said IATA's director general and CEO Giovanni Bisignani.

Improved economic prospects in Europe and Asia combined with an improving situation in the United States will lead to reduced losses in 2006 and strengthened profitability in 2007. ''While the trend is positive, we are nowhere near sustainability.'' A profit of 7.2 billion dollars is only a three per cent return on capital invested. Improved cost efficiency should be at the top of the agenda for everyone in the airline industry, said Mr Bisignani.

''At the same time, governments must get out the way of a hyper-competitive airline industry on commercial issues and take a much closer look at the efficiency of airport monopolies.'' He announced the new forecast in a speech delivered recently at the Wings Club in New York.

The revised forecasts are based on crude oil prices of 57 dollars per barrel (Brent) in 2006 and 52 dollars per barrel in 2007. Oil remains the single biggest challenge for airline profitability.

Strong demand gives little hope of reduced prices this year.

''What is disappointing is the response of the oil industry.

Instead of expanding refinery capacity, the oil companies plan to return a quarter of a trillion dollars to investors over the next two years. Airlines alone have contributed a 14 billion dollars to this windfall profit. It is time that governments stepped in to encourage investment in new refinery capacity along with research into alternative fuel sources,'' said Mr Bisignani.

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