World airline profits were likely to sink further in 2000 after taking a nosedive in 1999, Pierre Jeanniot, director-general of the International Air Transport Association (IATA) said yesterday. “When I looked at the projections for this year, I’m alarmed at the fact that profitability is further deteriorating,” Jeanniot told reporters on the sidelines of IATA’s Sydney annual general meeting.
“It looks like we’ll have some difficulty getting to US$1.5 billion (profit) in 2000. It’s still early, and I’m talking of course on international routes here,” he said. Results announced to date by major European airlines including British Airways Plc, KLM Royal Dutch Airlines NV, and Alitalia supported these projections, Jeanniot said.
“It’s a major reversal for some of those in terms of their track records and we’ve got to stop the erosion,” he said. IATA told its AGM that 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. The body said returns to its 268 member carriers after payment of interest on loans was only $1.9 billion, nearly 40 percent down on the $3.1 billion of 1998. IATA said in 1998 and 1999, the total operating profit of its members was only $5 billion, or a minuscule 1.7 percent of operating revenues. While the industry needed to focus on e-commerce to reduce cost and improve customer services, its fundamentals were still based on unit cost, capacity and yield, Jeanniot said. Asian economies were now showing strong signs of bouncing back after the regional economic slow-down which had had a “boomerang effect,” said Jeanniot, resulting in excess capacity on the Atlantic routes and substantial discounting. Reuters