Record number of airlines fold in first half of 2008

Global - A record of 25 airlines went bankrupt or ceased operations in the first six months of the year, with more possibly following suit should oil prices remain high.

Most carriers are part of the IATA payment scheme, under which carriers are credited money when a customer purchases an airline ticket from a travel agency. IATA will suspend payment to the airline should the carrier go bankrupt or ceases operations. IATA said it had suspended 25 airlines from the settlement system in the past six months.

The 25 carriers are both large and small players, and include names like UK-based Silverjet and Cameroon Airlines.

The situation is the worst the aviation industry has seen, said International Air Transport Association (IATA) spokesperson Anthony Concil, especially when compared to the six months after the 9/11 terror attacks, which saw eight airlines ceasing operations. 

Concil said every dollar increase in crude oil prices translates into some US$1.6 billion in additional costs to the aviation industry. This puts significant strain on bottom lines, as where fuel prices used to make up only 13% of airline costs, they are now fast reaching 35%, IATA estimated.

Oil prices have soared from about US$75 in July last year to a high of US$156 per barrel this July, while the price of jet fuel has almost doubled that of a year ago at US$171.90 in June.

In a June financial forecast, IATA said the revenue cushion that allowed the fuel cost surge to be absorbed in the four years to 2007 is gone, and expects "significant losses in 2008 of between US$2.3 billion and US$6.1 billion" for the industry.

"Certainly the high price of fuel is having an enormous impact on the industry and we do expect the list of 25 will grow," Concil said.