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Sun 1 Oct 2006 12:00 AM

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Airlines to get back to black in 07

The global airline industry is expected to be back in the black for the first time in six years in 2007, IATA’s director general and CEO, Giovanni Bisignani has revealed.

“We are looking at a marginal profit of around US $1 billion [for 2007],” he said, speaking at the air route development conference, Routes, staged in Dubai last month.

“For an industry with $450 billion revenue, that’s a low figure and I am not cracking open the champagne, but we are moving in the right direction.”

Back in June, IATA estimated $3 billion losses for the year, based on an oil price of $66 per barrel (Brent) and a total fuel bill of $112 billion.

This was later revised to US $1.7 billion, taking into account a fuel bill of $115 billion and calculated according to an average oil price of $68 per barrel.

Bisignani said the annual fuel bill for 2006 would still stand at $115 billion, but he attributed the gains made to improved efficiency across the board.

“Labour productivity has improved, distribution costs have improved and new planes are more efficient.

The industry is now lean and ready for profitability,” he said.

But he warned that the combination of the “US-led economic slowdown” predicted for 2007, terrorism threats and Middle East instability, could threaten profitability.

Bisignani also called on governments worldwide to help create a “harmonised set of rules” that would liberalise the skies and enable the airline industry to operate in a free market.

The Middle East’s airline industry, said Bisignani, was championing such liberalisation, and for the last three years, had led industry traffic growth.

From January to July, for example, passenger traffic growth in the Middle East hit the 16.4% mark, compared to the 6.4% global average.

However, the region’s slow uptake of e-ticketing, which will be mandatory under IATA rules by December 31, 2007, could impede profitability, Bisignani emphasised.

“E-ticketing uptake in the Middle East is currently 9%; an embarrassing situation for an area growing so fast,” he said.

The 9%, led by proactive carriers such as Emirates, Oman Air and Gulf Air, according to IATA, compares to the 57% worldwide average.

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