Profits Decline Sharply for Air Carriers Worldwide

World airlines saw a sharp drop of $1.2 billion in overall profits last year, largely due to a huge rise in fuel costs and a decline in yields from fares, said global industry body International Air Transport Assn.

In a report for its annual general meeting in Sydney today, it said returns to its 268 member carriers after payment of interest on loans was only $1.9 billion, nearly 40% below the $3.1 billion of 1998.

“During the past year, the twin pressures of fuel cost increases and yield erosion have squeezed airlines rather hard,” said IATA Director-General Pierre Jeanniot in a speech prepared for delivery at the gathering.

The report said total profitability of members of Geneva-based IATA in 1998 and 1999 was only $5 billion, or a minuscule 1.7% of operating revenues.

“Collectively, the net profit should be about three times higher, if we are to attract new investment and to continue to invest in the latest fuel-efficient, environmentally friendly technology,” Jeanniot declared.

Overall, IATA members’ revenue from scheduled international flights last year was $146.3 billion, $3.6 billion up on 1998, according to the report.

But expenses climbed over the same two-year period by $4.3 billion, to $140.9 billion in 1999. Net interest on loans--normally taken out for the purchase of new aircraft--was 3.5%, IATA said.

The annual report gave no separate figures for individual airlines, nor did it break down the impact of fuel prices--which Jeanniot said soared by some 200% for the industry last year--and yields, or revenue per seat.

But analysts said the closeness of the gap between operating income and expenses in 1998 and 1999--$6.3 billion and $5.4 billion-- suggested that competitive fare-slashing by many airlines had played a key role in the profit decline.