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Airlines 'end 2004 $5bn in red'

The world's airline industry is set to rack up losses of almost $5bn (£2.6bn, 3.6bn euros) this year, global airline body IATA has forecast.

It also warned that the industry would only climb back into profit next year if oil prices fell.

If oil prices remain around the $40 a barrel level, industry losses will rise to $5.3bn in 2005, the IATA added.

The latest figures marked a sharp rise in loss forecasts from the $3bn loss the group forecast in the summer.

While yields - the amount of money made per seat on flights flown - had declined, the IATA blamed the projected loss squarely on rising fuel costs.

'Wiped out'

Director general Giovanni Bisignani described the soaring prices as "the fifth horseman of the Apocalypse for our industry".

Chief economist Brian Pearce added that, by the end of the month, fuel costs will have hit $62bn - up 23% on last year.

He added that huge cost-cutting measures carried out by companies this year had effectively been wiped out by rising oil costs.

The price of a barrel of oil needs to drop to $36 for airlines to break even, while a fall to $30 a barrel would see profits soar to $5bn, Mr Pearce said.

Airlines have weathered a turbulent few years with profits suffering from the Sars outbreak, Iraq war and terrorism fears in the wake of the 11 September 2001 attacks.

Yields down

More recently, the emergence of no-frills, low-cost airlines has been eating into profits at bigger names such as British Airways.

"The main culprit is the rise in fuel prices, but there has also been a decline in yields," Mr Pearce told journalists.

Yields have been dropping as traditional airlines offering full services have begun to slash prices in the face of mounting competition from low budget airlines.

However, Mr Bisignani did add that behind the "terrible figures" the basis of a profitable industry was emerging.

Passenger numbers had hit a record 1.8 billion, while air traffic is expected to grow by an average 6% a year to 2008.

IATA members account for 95% of companies operating international flights, a total of 270 major airlines.

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