IATA: World Airline industry faces risks and challenges

KUALA LUMPUR, June 8 (Xinhua) -- Fuel bill, efficiency, cash reserves,
capacity management, and partnerships were the risks and challenges of the
present airline industry, according to the International Air Transport
Association (IATA) on Monday.

The industry fuel bill for 2009 would account for 23 percent of its
operating costs with an average price of oil at 56 U.S. dollars per barrel
(Brent), the association said as its 65th Annual General Meeting officially
kicked off here.

While, the fuel bill for 2008 was 165 billion dollars or 31 percent of
operating costs at an average of 99 dollars per barrel.

"Greedy speculation of oil prices must not hold the global economy hostage.
Failure to act by governments would be irresponsible," said IATA's Director
General Giovanni Bisignani.

He predicted that the industry's fuel bill decline by 59 billion dollars to
106 billion dollars this year.

Bisignani also said the industry gained efficiency over the last decade.
Its labor productivity improved by 71 percent, fuel efficiency increased by 20
percent and load factors rose by 7 percent.

"The dramatic downturn in demand could push the non-fuel unit costs higher,
which cannot be cut in proportion," said Bisignani.

Bisignani further noted that the third challenge was cash reserves.

Global airlines were in a better cash position than when the industry was
facing the challenges of September 11, he said.

Cash reserves of 70 billion dollars or 13 percent of revenues were stronger
than the 9 percent reserves that airlines had in year 2000.

"But our pocket are not that deep. A long L-shaped recovery could drain the
industry of cash," said Bisignani.

Also, Bisignani noted that airlines should be careful in capacity
management since global load factors for the first quarter of 2009 were down
about 3 percent compared to 2008.

"This is less than the falls experienced in some recent crises as a result
of airlines better matching capacity to falling demand," said Bisignani.

He said that the 4,000 aircraft expected to enter commercial aviation fleet
in the next three years would make the capacity management as an ongoing
challenge.

Bisignani also noted that limitations on ownership continued to hinder
broader partnership across borders among airlines.

Special Report:
Global Financial
Crisis