THE rising cost of aviation fuel is outstripping efficiencies being found by airlines and could force some out of business within the next year.
President and chief executive of Gulf Air James Hogan told ITT delegates the airline industry’s fuel bill will be $112 billion this year, up $21 billion on 2005, while labour productivity has improved 33%, sales and distribution costs are down 10% and revenues up 10%.
Hogan said Middle Eastern airlines provide a vital bridge between east and west, but aviation fuel will continue to be the sector’s biggest challenge in the next two years as many airlines’ hedging deals run out and the supply of oil is increased.
“There are so many influences outside our control. More people have travelled as fuel has increased, the challenge for the airlines has been revenue. Fuel companies are improving their refining capabilities but that won’t kick in for a long time,” Hogan said. “What you will see in the next 12 months is some airlines going out of business.”
Further regionalisation and consolidation is expected in the airline sector with many looking to differentiate themselves through better service levels. Gulf Air has introduced Sky Chefs in its first-class cabins and onboard nannies.
Earlier this year Gulf Air introduced a double-daily service from Heathrow except Thursday to meet demand.