Global aviation industry fears hefty US$10b loss

PUBLISHED : Thursday, 06 February, 2003, 12:00am
UPDATED : Thursday, 06 February, 2003, 12:00am

The global airline industry is facing a loss of up to US$10 billion this year, according to a respected Australian-based think-tank.

It would be the third successive year of staggering losses for the industry and the situation could get even worse if war broke out between the United States and Iraq, the Centre for Asia-Pacific Aviation said.

Losses in the past two years had combined to wipe out the airline industry's total profits since 1945, even before fears of a further huge slide this year were factored in, it said.

Peter Harbison, the think-tank's managing director, said the 280 members of the International Air Transport Association (Iata) would post an aggregate loss of between US$5 billion and US$10 billion this year, provided there was no war with Iraq or further terrorist attacks.

Iata airlines, which account for 95 per cent of scheduled services, posted a loss of US$18 billion in 2001 and US$13 billion last year.

By comparison, the airlines earned a total US$13.3 billion in the four years leading up to 2001.

'The US carriers are projecting US$5 billion in losses this year as things stand. If there is prolonged uncertainty or war, they could lose an additional US$4 billion for each month it goes on,' Mr Harbison said.

International airlines would be lucky to get away with a combined loss of US$3 billion to US$5 billion for the year, he said.

But as bad as the forecast sounds, a prolonged war between the US and Iraq 'could easily blow a hole in the best estimates', Mr Harbison said.

He said war in the Middle East could push up jet fuel prices by as much as US$10 per barrel, tacking on an average 5 per cent to the cost of operating a major international airline.

Nor would even the best-run Asian carriers be insulated from the damage, as they largely have been in the uncertain climate so far.

'Asian carriers thought to be well-hedged against rising fuel prices are more exposed than ever. Most of them seem to have held off securing fuel contracts at the end of last year as fuel prices rose,' Mr Harbison said.

'It isn't a good outlook.'