IATA: World Airline industry faces risks and challenges

KUALA LUMPUR, June 8 (Xinhua) -- Fuel bill, efficiency, cash reserves, capacity management, and partnerships were the risks and challenges of the present airline industry, according to the International Air Transport Association (IATA) on Monday.

The industry fuel bill for 2009 would account for 23 percent of its operating costs with an average price of oil at 56 U.S. dollars per barrel (Brent), the association said as its 65th Annual General Meeting officially kicked off here.

While, the fuel bill for 2008 was 165 billion dollars or 31 percent of operating costs at an average of 99 dollars per barrel.

"Greedy speculation of oil prices must not hold the global economy hostage. Failure to act by governments would be irresponsible," said IATA's Director General Giovanni Bisignani.

He predicted that the industry's fuel bill decline by 59 billion dollars to 106 billion dollars this year.

Bisignani also said the industry gained efficiency over the last decade. Its labor productivity improved by 71 percent, fuel efficiency increased by 20 percent and load factors rose by 7 percent.

"The dramatic downturn in demand could push the non-fuel unit costs higher, which cannot be cut in proportion," said Bisignani.

Bisignani further noted that the third challenge was cash reserves.

Global airlines were in a better cash position than when the industry was facing the challenges of September 11, he said.

Cash reserves of 70 billion dollars or 13 percent of revenues were stronger than the 9 percent reserves that airlines had in year 2000.

"But our pocket are not that deep. A long L-shaped recovery could drain the industry of cash," said Bisignani.