Up to a quarter of the world’s airlines could go broke if fuel costs fail to keep going down and oil prices return to $US145 a barrel, Emirates president Tim Clark has warned.
Mr Clark, who had believed oil prices would settle between $US65 and $US85 a barrel by June, said over the weekend that speculators were moving off fuel and the price was coming down as the global economy softened.
“If it comes back down to $US100, if it trades between $US85 and $US105, then we can manage that and the airline business worldwide will pick up again,” Mr Clark said during the inaugural flight of the airline’s Airbus A380 between Dubai and New York.
“At $US145, by June of next year, 25 per cent (of carriers) will be bust. Whether or not they are still flying, technically they will be bust.”
Emirates has a $US500 million cost-cutting program under way and Mr Clark admitted that fuel prices had hit the airline’s profitability for six.
He said the airline was already seeing weakness in some markets and how it would be affected was a question of how long and how deep the downturn was and how it affected travellers.
But he said Emirates had been through similar traumas many times before.
These included SARS, an outbreak of plague in India, 9/11, two Gulf wars, the Afghan wars, and the Iran-Iraq war.
“We’ve had all of this and we just kept on going,” he said, adding he was confident the airline would achieve its cost-cutting target.
He was also confident that Emirates would continue to expand its Australian services. The airline is to reach 70 flights a week next year, from the present 49.
The current air services agreement with the United Arab Emirates allows the Dubai carrier to expand to a maximum of 84 flights a week to the nation’s four biggest airports, with unlimited capacity to other cities.
Mr Clark was unable to say when the airline would hit that ceiling.
But he said the Gulf carrier’s new flagship, which has first class showers and a full lounge bar, would be seen in all four of the big capital city airports.
With 58 firm orders, Emirates is the world’s biggest customer for the A380 and is due to make its first flight to Sydney and Auckland on February 1.
“It will go to Melbourne, it will go to Sydney and eventually it will go to the other two points as well,” he said, adding that timetables would be dependent on delivery schedules.
Emirates would not be charging more for its A380 seats and Mr Clark said he expected some passengers to arrange their travel around the big plane.
But he said the airline’s latest 777-300ERs’s would be equipped with the same features, other than the bar and shower.
Mr Clark also said he would not be surprised if deliveries of the A380 were further delayed.
He said Airbus was finding the switch to a new production system harder than it thought.