Airlines set for a £3.3bn hit from rise in fuel costs

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Painting a grim outlook for the industry, IATA's director general and chief executive Giovanni Bisignani said he expected to see more airlines go bust as sky-high fuel prices slash profitability.

"We are in a perfect storm of uncontrollable fuel costs and falling demand," Bisignani told the Australian National Aviation Press Club in Sydney.

"Airlines could lose as much as $6.1 billion this year. Already some 25 airlines have gone bust - greater than immediately following 9/11 - and we are bracing for more. Despite some relief in the oil price, we are a fragile industry that is in a crisis."

Since 2002, the price of oil has jumped from $25 a barrel to more than $140. It sits at about $110 but Bisignani said it could easily surge again on instability in Russia and the Middle East. He said oil prices seemed to be permanently higher than five years ago and were "reshaping the business in a way that demand shocks of SARS (Severe Acute Respiratory Syndrome) or 9/11 did not".

IATA represents around 240 air carriers accounting for 94% of world air travel. In June, it dramatically slashed its industry profit forecast of $4.5 billion to a loss of $2.3 billion if oil averaged $106.5.