Geneva - Twenty-five airlines went bust or stopped operations in the first six months of this year and more could fold as fuel prices soar, a spokesperson for the aviation industry association IATA warned.
"In the last six months we suspended 25 airlines from the settlement system. Suspension occurs when an airline goes bankrupt or ceases operations. This is more concentrated than at any time in the history of the system," IATA spokesperson Anthony Concil said.
The list included airlines big and small from all regions, such as Cameroon Airlines, Denver-based Frontier Airlines and UK-based business class airline Silverjet.
In comparison, in the six months following the attacks in New York and Washington on September 11, 2001, only eight airlines folded, including Swissair, Belgian flagship carrier Sabena and Australia's Ansett.
While Concil would not speculate on airlines that were vulnerable to bankruptcy in the coming months, he said: "Certainly the high price of fuel is having an enormous impact on the industry and we do expect the list of 25 will grow."
'Airlines finding themselves on the line'
The IATA payment system is used by most of the carriers that are part of the association.
When a customer buys an airline ticket from a travel agency, the agency pays IATA, which then credits the account of the carrier in question.
But when an airline is threatened with bankruptcy, it is suspended from the system in order to ensure that funds are available to reimburse customers when necessary.
With the explosion in fuel prices, airlines are increasingly finding themselves on the line.
Concil said that every dollar increase in crude oil translates to $1.6bn in additional costs to the aviation industry.
Brent crude has soared from about $75 in July last year to a high of $146 this July.
Jet fuel price doubled
Consequently, the price of jet fuel has also surged. For the week ending June 27, jet fuel prices were $171.90 per barrel, or almost twice that of a year ago.
While fuel prices used to make up just 13% of airline costs, they were now fast reaching 35% of costs, estimated IATA.
In a June financial forecast, IATA said the problem was that the "revenue cushion that allowed the fuel cost surge to be absorbed in the four years to 2007 has gone."
It now expected "significant net losses in 2008 of between $2.3bn and $6.1bn" for the industry.
But beyond fuel price inflation, the sombre economic backdrop was a double whammy to the dire situation.
IATA said in March, business travel - which contributes significantly to revenues and profits - contracted by the "largest amount seen since 2003."
Less people are flying
Economy travel growth meanwhile, slowed to less than 1.0% at the end of the first quarter, compared to over 6.0% last year.
All these developments add further pressure to ailing airlines such as Italy's Alitalia.
The ANSA news agency reported in late June that the airline's chairperson said the carrier was facing a "last chance" to secure a rescue plan.
"In a few days, we will know if the advising bank, Intesa Sanpaolo, is in a position to present an appropriate recovery and development strategy," he was quoted as saying.
Intesa Sanpaolo was tasked with advising the airline on its privatisation.
Alitalia, in which the government has a 49.9% stake, is currently losing some €3m euros per day because of lower revenue and higher oil prices, according to the Rome daily Il Messaggero.
If a rescue plan fails to materialise, the airline could well join IATA's list of unfortunate carriers.
- AFP