Airlines are reacting to the expected rise in the cost of fuel by increasing ticket prices by up to 5% as the International Air Transport Association (IATA) warns that hopes for the promised return to profitability could be dashed if the trend continues.

IATA director general and chief executive Giovanni Bisignani says that, although passenger traffic for the first four months of this year is 15% up on the same period in 2003, the projected hike in fuel costs could add $8-12 billion to annual airline fuel costs, "which could strangle our modest projected return to profitability".

He adds that fuel, which accounts for about 16% of airline costs, is 55% more expensive than a year ago. "The current crisis resulting from sky-high fuel prices once again highlights the industry's vulnerability to external shocks," he says.

Bisignani says the cost-cutting, restructuring and re-engineering carried out by airlines in recent years is not enough. "We need to change the whole structure of the industry," he says. IATA will discuss the crisis at its annual general meeting in Singapore this week. A spokesman says talks will centre on moves to reduce costs by eliminating the monopolies held by many air navigation service providers and airports as well as looking at simplifying the business.

Meanwhile, Ryanair president Michael O' Leary dismisses worries over fuel costs as "hysteria", adding: "We believe the growth of low-fare air travel will not be damaged or slowed by higher oil prices, which will only hasten the demise of some of the current wave of loss-making start-ups and high-fare flag carriers." He says the major airlines' decision to impose fuel surcharges "is typical of the anti-consumer mindset of high-fares airlines".


Source: Flight International