Airlines to return to profitability this year

By Ian Goold

June 19, 2007
General Aviation

After five years of hard work and great change, airlines expect a projected profit in 2007, according to the International Air Transport Association (IATA). Carriers nearly broke even in 2006 and expect to make $5 billion this year, said director-general Giovanni Bisignani.

“Five years ago it was a different world. We needed an oil price of less than $20 per barrel to break even and low-cost competition was new and tough.” He said that compared with 2002 “labor productivity is up 56 percent, distribution costs are down 13 percent, nonfuel unit costs are 15 percent lower and average load factors are at a record high of 76 percent.”

Bisignani pointed out that airlines currently are profitable with oil at nearly $70 per barrel. “Airline stocks are up 50 percent over last year, but a reality check is necessary,” he warned.

“We are a $470 billion industry and a profit of $5 billion is peanuts. We need $40 billion to cover the cost of capital. The industry is $200 billion in debt.”

Accordingly, Bisignani outlined six priorities: to improve safety by 25 percent by the end of next year; to improve security, with greater implementation of biometric identification; to simplify business through greater use of electronic communication; infrastructure providers must become more efficient; there must be greater liberalization permitting airline consolidation; and, finally, air transport must become an industry of low emissions.

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