Istanbul: Nearly two dozen airlines worldwide have folded up in the first five months of this year, up to eight times the number of average annual closures in the industry, as aviation fuel prices skyrocket.
The number of failed airline companies could swell further in the year if the current trend of soaring oil prices continues, Giovanni Bisignani, the chief executive of the International Air Transport Association, or IATA, warned attendees at an annual conference of the aviation agency.
US’ Aloha Airlines Inc., ATA Airlines Inc., Skybus Airlines Inc. and Frontier Airlines Holdings Inc.; Silverjet Eos Airlines and Coast Air of the UK; Scotland’s City Star; and Hong Kong-based Oasis Hong Kong Airlines Ltd are among carriers that have shut shop or filed for bankruptcy.
The 223-member strong international agency, which counts National Aviation Co. of India Ltd-run Air India and Jet Airways (India) Ltd as its members, said it was time for urgent cuts in government taxation, fixing airport infrastructure, and relaxing bilateral norms to manage the “crisis”.
“It is potentially the biggest crisis the industry has ever faced,” said Bisignani, referring to the global rise in fuel costs, which comes at a time when growth in global passenger traffic is slowing. Airlines worldwide are now expected to report a loss of $2.3 billion this year against a $5.6 billion profit in 2007. These losses could deepen further with crude oil hovering around $135 a barrel. If crude continues to trade at $135 a barrel, he said, the industry would be paying a total of $200 billion in fuel bill against just over $30 billion in 2002.
With each dollar added to crude oil prices, costs to airlines go up $1.6 billion, he said, announcing an all-government meet in the second half of this year to explain the magnitude of the problem faced by the industry that turns in business worth $3.5 trillion worldwide and directly or indirectly provides 32 million jobs across the globe.
“We are in an emergency mode, so we want quick actions (from the government),” he told those attending the 64th annual general meeting of the IATA here.
Separately, in New Delhi, aviation minister Praful Patel said the Union government will explore options to ease pressure on airline firms. “The impact of rising fuel prices is going to hurt the aviation sector in a large way,” Patel told reporters. “I have informally been told by airlines they would like to prune their services, rationalise their services.”
Aircraft manufacturers too hope to tweak the new realities in their future industry forecast of the aviation market. Boeing Co.’s vice-president for sales of commercial airplanes, Dinesh A. Keskar, said his firm will announce its global market outlook for aircraft purchase for the next 20 years in July this year.
In 2006, the Boeing forecast for the Indian market included 911 planes of all sizes valued at about $86 billion for the next two decades. Since then, the estimate for the country saw an addition of more medium- and long-haul planes valued at an additional $10 billion. But “as economic activity increases, things will change too,”Keskar added.
Tarun Shukla was in Istanbul as a guest of IATA.
Reuters contributed to this story.