Global growth in air passenger traffic will drag next year due to a general economic slowdown, but falling oil prices could help airlines cut their losses, the industry's trade group said Wednesday.
The airline industry, which will probably suffer net losses of $4.68 billion this year, could break even in 2006 if fuel prices drop sufficiently, the International Air Transport Association said.
"There is now a case for qualified optimism about the industry's financial performance," said IATA chief economist Brian Pearce.
IATA expects losses next year to narrow to $4.3 billion, and forecasts the industry to swing to a net profit in 2007.
But Pearce, speaking at IATA's Geneva headquarters, said the industry could break even if oil dropped as far as $50 a barrel. Crude oil prices currently hover above the $60 a barrel mark.
Growth, however, in air passenger traffic for both international and domestic flights is expected to drop from 7.1 percent this year to 4.5 percent in 2006, said IATA Chief Executive Giovanni Bisignani.
"We are already seeing slower growth for passenger traffic," Bisignani said.
Pearce said this slowdown follows the trend seen in freight traffic during 2005. Passenger traffic usually lags developments in air cargo traffic, he explained.
In July, IATA said cargo traffic grew by only 3.2 percent between January and June, as high fuel prices and a slowdown in the global economy took their toll. It grew by 13.2 percent in the same six-month period in 2004.
Air passenger traffic had faster growth, at 8.8 percent, in the first six months of 2005. The growth was led by airlines from the Middle East, Latin America and North America, which all recorded an increase in passenger travel above 10 percent.
Nevertheless, Pearce said the industry's overall performance was being weighed down heavily by performance in the United States.
"In 2005, U.S. net losses may reach $10 billion, as substantial restructuring costs and debt interests added to a deterioration in operating performance," he said.
Bisignani said prospects for 2006 could also could depend on other factors, noting that the industry had been hit by a number of crises in recent years - including SARS, war and terror.
"Avian flu is another potential shock if we see human-to-human transmission," Bisignani said. "Based on our experience with SARS, we are coordinating with WHO."
He said the industry had put no emergency action in place, but "we are prepared to act if the situation becomes more serious." Experts fear the H5N1 strain of bird flu that has killed at least 69 people in Asia could trigger a human flu pandemic if it mutates into a form that is easily spread between people.
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Soaring fuel prices are increasing the need for greater efficiency in air traffic control to curb any unnecessary flying time, IATA said.
For May, freight traffic was 1.6% below the 2004 level. Passenger traffic showed 8.8% growth comparing the same period.
While passenger growth slowed, the bottom line improved. The industry showed an estimated operating profit of $10.2 billion for 2006.
The high load factors along with fuel surcharges are helping airlines to partially mitigate the soaring price of fuel.