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Sky High Fuel Prices Cut Profits

“International passenger and cargo traffic growth continued to exceed expectations through July, however the extraordinarily high level of oil prices points to yet another year of significant airline losses,” said Giovanni Bisignani, Director General and CEO of IATA.
“Ending the year with double-digit passenger growth is possible given the industry’s performance for the first seven months of 2004. This includes a significant one-off rebound in traffic from SARS in 2003.ÊÊ More importantly, we are seeing a solid recovery in the underlying growth of international passenger traffic over the past year,” said Bisignani.
Asia continues to display a strong rebound from the traumatic events of 2003 with the January to July passenger traffic showing a 29.4% improvement on 2003 levels. Middle Eastern carriers exceeded that with 33.5% growth. All other regions also reported double digit year-on-year growth for the January to July period. When compared to the same period in 2000, the severe shocks of the last several years are apparent. Global passenger traffic in the first seven months of 2004 was just 8.2% above 2000 levels.. By comparison, European carriers posted only 2.1% growth for the same period.
Freight volumes show solid and accelerating growth. Driven by buoyant world trade and far less distorted by SARS and other shocks affecting passenger traffic, year-on-year freight volumes grew 14.1% in the first seven months of 2004 over 2003 and 15.3% when compared to 2000.
“Positive traffic results have been overtaken by fuel costs. They are our biggest nightmare,” said Bisignani.
Each dollar added to average price of a barrel of Brent over the year adds a US$1 billion to the industry’s costs. Airlines are using capacity wisely with passenger load factors rising to 78.4% in July 2004. They are also taking a wide range of measures to improve fuel efficiency.
“But airlines cannot do it alone. The high cost of fuel exaggerates existing inefficiencies in the industry’s infrastructure. Air traffic control delays and inefficient routings are wasteful something we cannot tolerate.Ê Our ATC partners must drive inefficiencies out of their systems,” said Bisignani.