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Airline Industry Says Fuel Costs, Taxes Have Vaporized Profits

With the airline industry predicting losses this year totaling $6 billion, the association representing nearly all of the world's air carriers is calling for governments to take a friendlier approach.

Surging fuel prices - rising nearly 90 percent over the past three years - are greatly to blame for the airline industry's staggering losses, but there are other factors, as well.

The director general of the International Air Transport Association, Giovanni Bisignani, told reporters on Tuesday that taxes and surcharges imposed by local and national governments are also hurting air carriers. "We are not looking for assistance, we are not looking for subsidies," he said. "We are looking for the government to play their role. Taxation - do you think that it is fair 26 percent on a $200 ticket in the United States, that we are taxed more than alcohol and tobacco? Do you think it is reasonable that we pay $5.6 billion for security?"

The association is also fighting a French-German proposal to tax air tickets to aid the developing world.

The incoming chairman of IATA's board of governors, the head of Air Canada, Robert Milton, said the industry adapted following the September 11, 2001 attacks in the United States that struck a big blow to global travel. He says while airlines slashed costs and recorded their safest year in 2004, airport operators and governments' actions have hindered the industry's recovery.

"After 9/11, on the basis of decreased traffic activity, rates across the board, all over the place - air traffic controls, airports, went through the roof. 'Hey, we've got less activity, we better [raise] prices so we don't have to cut anything.' Well, you know what? Now we're back up to those [pre-9/11 air traffic] levels and we're not seeing a corresponding decrease," he said.

But many passengers have little sympathy for the plight of long-established carriers, which they see as surviving on subsidies and favorable treatment by bankruptcy courts. Consumers in North America and Europe, especially, are choosing instead to fly on upstart low-cost carriers.

The U.S. airline industry was hardest hit after the September 2001 terrorist attacks. United Airlines and U.S. Airways are in bankruptcy and several others are believed close to heading to bankruptcy court.

The region least affected by economic turbulence has been Asia, where airlines logged profits of more than $2.5 billion last year.

Japan Air Lines spokesman Geoffrey Tudor said while projections looks bright for Asia, it will not be a smooth ride here either in the years ahead. "In a very short time the Chinese aviation market will be greater than the major aviation market in Asia now, which is Japan. But that still leaves airlines with these difficult problems: the fuel thing, the willingness of governments to impose high taxes on airlines. We're still being treated as a kind of cash cow," he said.

The International Air Transport Association, pledging to further reduce industry costs by $6.5 billion annually, has unveiled a business simplification initiative. Among its elements are converting the entire industry to electronic ticketing by the end of 2007, further automating passenger check-ins, putting hi-tech identification tags on baggage and reducing paperwork for cargo.

IATA also has its attention focused on Africa. The association has established a fund to improve safety standards and cut accidents on the continent by 25 percent before 2007. IATA says Africa accounts for 27 percent of all fatal accidents in the world but just three percent of flights.