(Washington) The International Air Transport Association (IATA) announced a revised industry loss forecast of US$7.4 billion for 2005 in light of skyrocketing oil prices. The revised forecast is based on an average oil price (over the 12 months of 2005) of US$57 per barrel (Brent). In May IATA issued a loss forecast of US$6.0 billion based on an average price of oil at US$47 per barrel.

"Oil is once again robbing the industry of a return to profitability. Each dollar added to the price of a barrel of oil adds US$1 billion in costs to the industry. Cost reduction and efficiency gains have never been more critical," said Giovanni Bisignani, IATA's Director General and CEO.

"Buried in the industry's red ink, there is a incredible story to be told. Despite adding US$10 billion to our cost estimates, the incremental impact on the bottom line has been limited to US$1.4 billion. The airline battle to reduce costs, increase yields and improve efficiencies is effective well beyond expectations," said Bisignani.

The regional profitability picture is mixed. While European airlines are expected to break even and Asia Pacific carriers will make in the range of US$1 billion, losses by North American carriers could exceed US$8 billion. Cumulatively, airline industry losses for 2001-2004 were US$36 billion, US$32 billion of which was lost in North America.

The industry fuel bill rose from US$44 billion in 2003 (at an average price of US$29/barrel Brent) to US$63 billion (US$38/barrel Brent) in 2004. At US$57 per barrel, the industry fuel bill for 2005 will top US$97 billion. "With a total industry turnover in the range of US$400 billion per year, a fuel bill of US$97 billion makes up 25% of our total costs. In less than two years the total bill has more than doubled," Bisignani.

In addition to increased oil prices, refinery margins for jet fuel have increased from US$6 per barrel in 2003 to US$17. "We fully understand the principles of supply and demand. But it is difficult to see this as anything other than a US$14 billion cash grab by the oil industry that is pouring salt into the wounds of a global crisis. Moreover, the impact of Hurricane Katrina on fuel supplies and refinery capacity will only ensure that relief will not come soon. To cope, urgent structural change across the industry's value chain is essential," said Bisignani.