Surging oil prices caused by the political turmoil in the Middle East will create "very, very big challenges" for airlines, an industry body said Wednesday.
Surging oil prices caused by the political turmoil in the
Middle
East
will create "very, very big challenges" for airlines, an
industry body said Wednesday.
"Oil is a big problem because it could change completely the picture"
for the sector said Giovanni Bisignani, head of the International Air Transport
Association, or IATA, an organization that represents some 230 airlines
comprising 93% of scheduled international air traffic.
The political unrest that has swept the key oil-producing
Middle
East
and North African region, including
Libya
,
Bahrain
,
Yemen
and
Iran
, has
stoked fears of a disruption to global crude supplies and led to price spikes.
New York
's
main contract, light sweet crude for April delivery, rose 11 cents to $95.53
per barrel in Wednesday afternoon trade and Brent North Sea crude for April was
up $0.69 at $106.47.
Bisignani said in
Tokyo
that
high energy prices could turn what had been "forecast to be a profitable
year into a very complicated year" and spell "very very big
challenges" for airlines.
IATA recently predicted passenger traffic would grow for the second consecutive
year after its crisis-driven drop in 2008, but it said net profits for airlines
as a whole would fall 40% to $9.1 billion in 2011.
The forecast was based on an oil price of $84 per barrel for Brent crude.
A price of $104 dollars per barrel would mean extra costs of $32 billion
dollars for the industry, Bisignani said.
"Part of this will be covered by fuel surcharges, but that is a commercial
decision. But it's a big, big burden for an airline."
Looking ahead, he said "I would need a chief magician" instead of a
chief economist.
"Let's hope the situation gets clarified. The impact is now not just on
fuel prices but also on the market," he said, noting that the
Middle
East
is a big passenger market and destination.
The regional political upheaval that started in
Tunisia
before spreading to
Egypt
is
now gripping
Libya
, with
reports of hundreds of deaths.
Long-serving leader Moamer Kadhafi on Tuesday ordered his supporters to crush
an uprising and warned he would fight to the death to remain in charge of the
country he has ruled since 1969.
"This is my country, my country," he raged on national television. "I
will fight to the last drop of my blood."
The violence across the country--inspired by the toppling of the leaders of
Tunisia
and
Egypt
--has
seen scores of people killed at the hands of Kadhafi's troops, sparking
international outrage.
Libya, which has Africa's largest oil reserves and is the continent's fourth
largest producer, is a member of the Organization of the Petroleum Exporting
Countries, or OPEC, which ships about 40% of the world's crude.
Uprisings have also broken out in
Morocco
,
Yemen
,
Bahrain
and
Iran
.
However, further crude oil price rises could be capped after Saudi Oil Minister
Ali al-Naimi said the OPEC oil cartel would step in to meet any supply shortage
caused by the turmoil.
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