Air traffic rising yet oil prices hit airlines

Paris, June 12: Sustained high prices of aviation jet fuel continue to haunt the global airline industry like fifth horseman of apocalypse, eroding profits despite record traffic levels.

Nearly 2.2 billion people are likely to travel by air this year, according to the International Air Transport Association (IATA).

Yet, the industry will see fuel bill topping 2 billion, up billion more than in 2005.

Airlines are removing magazines and extra ice-cubes from aircraft, introducing electronic ticketing and doing everything else possible to reduce costs and improve efficiencies.

Since 2001, labour productivity has improved 33 per cent, sales and distribution cost dropped 10 per cent and overall non-fuel reduced by 13 per cent. The industry also moved the breakeven fuel price from 14 dollars per barrel to 50 dollars per barrel.

Strong revenues have helped as well. For each of the past three years, revenues rose 10 per cent which is double the historical average.

Significantly, labour costs are coming down, even in Europe and the United States, but aviation fuel costs are going up with crude oil prices hovering over 70 dollars a barrel.

US airlines spent billion in buying aviation fuel during 2000, the year which was busiest in terms of air passenger traffic. In 2005, the fuel bill totalled billion with record losses.

UNI