Aviation chief attacks oil firms over $3bn losses

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The Independent Online

The head of the world's aviation industry launched a savage attack on oil companies yesterday, blaming them for the fact that global airline losses this year are set to reach $3bn (£1.6bn).

Giovanni Bisignani, the chief executive of the International Air Transport Association, said rising fuel prices had outstripped gains in efficiency and were set to cost the industry $112bn this year - $21bn more than 2005. Addressing the IATA's annual conference in Paris, Mr Bisignani criticised the oil industry for failing to invest in new refinery capacity, contrasting this with the $250bn they plan to return to shareholders over the next two years. He also said there needed to be more research into alternative fuels with a view to the airline industry replacing 10 per cent of its fuel sources by 2025.

"Oil remains the wild card," he said. "While the fuel price continues to race ahead of efficiency gains, it is truly amazing that profitability has not deteriorated from last year."

The IATA chief's criticisms echo those of the Virgin Atlantic chairman, Sir Richard Branson, who has said he may invest in his own refinery to secure more competitively priced supplies of aviation fuel.

The IATA forecast that losses of $5.2bn among North American carriers this year would more than offset profits made by airlines in all other regions, except Africa. Europe's airlines are forecast to make profits of $1.3bn while carriers in the Asia-Pacific region will notch up profits of $1.7bn.

The projected loss for this year is less than the $3.2bn loss that the industry as a whole recorded last year but it is sharply up on the $2.2bn loss for 2006 that IATA was predicting as recently as March.

The IATA calculates that the industry breaks even when oil is $50 a barrel. This year it forecasts that Brent crude will average $66 a barrel, increasing fuel as a percentage of total costs from 22 per cent last year to 26 per cent. The last time the world's airlines made a collective profit was in 2000 when they earned $3.7bn. In the five years since then they have lost $44bn.

The IATA chief went on to take the world's airports to task for rising charges to airlines and called for more effective regulation of airport monopolies.

"While we are making progress from Japan to Denmark, many airports are still in the dark. The gap between airline cost reduction and airport cost increases is not acceptable and it is not responsible."