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

Indonesian airlines stops operation amid crisis

Special
Report: Global Financial Crisis

JAKARTA, May 5 (Xinhua) -- An Indonesian airlines company stopped operation
following a severe financial problem, the first stoppage in the country amid the
crisis, local media reported Tuesday.

Due to a financial problem, Lintasan Nusantara (Across the Archipelago) has
filed in a notification to stop operation, a report of the Bisnis Indonesia
daily said.

According to the report, Air Transport Director General and the
Transportation Minister Herry Bhakti Gumay said it has received a request to
stop the operation of the company.

He said that Linus officially stopped its operation by April 27, adding
that all of its planes had undergone a periodical checks in a plane maintenance
facility.

He pointed out that with the notification, Linus Airways becomes the first
Indonesian airlines company that have stopped operation in the wake of economic
crisis.

Linus Airways has been in operation for one year using two BAe 146-200,
serving short-haul flights from Java to Sumatra and Kalimantan.

There are 49 airlines operating in Indonesia at the moment, serving the
transportation for the people living in hundreds of islands across the country.