High oil prices, credit crunch, can hurt airline industry: says IATA chief Giovanni Bisignani

18 September 2007

International Air Transport Association (IATA) director-general Giovanni Bisignani said on Monday 17 September that the high price of crude oil and the crunch in the international credit markets are serious causes of concern for airlines in 2008.

Bisignani said that airlines are expected to post a net profit of $5.6 billion in 2007, which amounts to around 1 per cent of revenues. In June, IATA had forecast a profit of $5.1 billion for the year.

The industry's profit forecast for 2008 has been lowered to $7.8 billion, down from the $9.6 billion projected last June.

Bisignani said one of the big problems in the coming year would be oil prices and the credit crunch. If it resulted in a loss of consumer confidence, there could be a sharply negative impact on demand. He said that the US Federal Reserve's decision on interest rates - the Fed meets on Tuesday - will have an impact on oil prices.

But, the IATA chief added, there was some positive news from airlines. He said that the restructuring of the airline industry in the US in particular and over North America in general had started to yield profits. He also called it a "wake-up call" for trade unions, which are engaged in negotiations with some American airlines.

The IATA chief's message comes on the eve of the 36th session of the International Civil Aviation Organisation (ICAO), which is to be held from 18 to 28 September. The ICAO's 180 member nations will meet in Montreal.