Thursday, March 22, 2012

Airlines About To Go Belly Up

Emirates, the biggest airline by international traffic, warned yesterday that airlines will go bust this year due to fuel costs and "sluggish economies".

Interesting that the same was feared about Air Canada, and most likely many others.

Tim Clark, Dubai-based carrier’s president, said that  “We can reel off a whole load of airlines that are teetering on the brink or are really gone,” “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”

Bloomberg reports that "Airline profits will plunge 62 percent in 2012 to $3 billion, equal to a 0.5 percent margin on sales, as oil prices rise, the IATA aid this week. Emirates’s fuel bill accounts for 45 percent of costs and may jump by an “incredibly challenging” $1.7 billion in the year ending March 31, according to Clark, who says he’s sticking with a no-hedging strategy rather than risking a losing bet.

“You think you’re going to win, but in the long term you always lose,” Clark said yesterday at the Gulf carrier’s head office near Dubai International Airport. “When we enter into derivatives, betting whatever it may be with counterparties who actually control the price of fuel in the first place, you have to ask yourself, ‘Is that smart?’”

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