PRICE OF OIL HITS AIRLINE PROFITS

THE high cost of oil will affect airline profits, according to Giovanni Bisignani, director general of IATA (International Air Transport Association), who said they could only save the day if the price of a barrel is pegged at around 33 dollars. He was speaking during the Association's annual general assembly in Singapore, attended by representatives of 276 companies. “Last year, the industry survived the four horsemen of the apocalypse - SARS, Iraq, terrorism and the economy - and now a fifth horseman has appeared, the price of crude oil which could add 1'000 million dollars (811 million euros) to our costs and cancel out profits,” he said. IATA had initially expected airlines to make a joint profit of 3'000 million dollars (2'435 million euros) after losses of 30'000 million dollars over the past three years but, Bisagnani said, these predictions had been based on an average price of 30 dollars for a barrel of oil. To combat the problem, Bisagnani called on airlines to design new structures for the industry. “Flexibility of costs has never been as critical as it is now,” he said. In his opinion, the expression “low cost airlines” is a mistake, as the structure of the future must be that of a “low cost industry”, insisting that changes should be aimed at a simpler marketing process and better security, relationships with the rest of the industry and the role of governments. He would like to see governments take on the responsibility of paying for national security currently paid for by the companies, which is about 1'000 million dollars (811 million euros) a year.