The global airline industry is forecast to have made net losses of $4.8 billion (€3.6 billion) this year, as the rise in the oil price has overwhelmed efforts by carriers to cut costs.

The International Air Transport Association (IATA) said yesterday that the aviation industry had suffered net losses of more than $35 billion in the last four years from 2001 to 2004.

Several airlines around the world have collapsed during the prolonged financial crisis, and two leading US carriers, United Airlines and US Airways, as well as ATA Holdings are still struggling to emerge from Chapter 11 protection from their creditors.

Mr Brian Pearce, IATA chief economist, forecast a small net profit for the industry in 2005 of $1.2 billion, based on an average Brent crude price of $34 a barrel.

If the oil price were to average $36 a barrel, the global aviation sector would be expected only to break even, however, and if the oil price were to remain next year at the 2004 average level of $40 a barrel, the industry would again face losses of around $5.3 billion.

The airline sector has remained in loss this year despite a gradual recovery in traffic levels, with the traditional network carriers, particularly those in North America and Europe, finding it difficult to recover any pricing power in the face of fierce competition from the growing number of low-cost airlines and overcapacity in many markets.

Still, many carriers in the Asia Pacific region have reported a strong financial recovery this year. - (Financial Times Service)