Airlines 'must slash unprofitable routes'

Paris: Airlines must slash unprofitable routes and raise passenger ticket prices to survive an industry disaster threatened by high fuel prices, Brazilian aircraft manufacturer Embraer has warned.

Many traditional carriers have already slashed costs in the face of competition from low-cost airlines but only tough measures to boost revenues will allow many of them to ride out what could be a five-year downturn in air travel, it said.

"Airlines have made a great effort to cut costs but many are still not profitable. They have to do something about excess capacity or they will keep losing blood with falling revenues," Luiz Sergio Chiessi, Embraer's vice president of airline market intelligence, told a press briefing.

The stark warning contrasts with booming demand for business jets reported by the same company on Friday.

Some premium customers, who make up most of the profits of traditional carriers, are defecting to business jets, finding them safer and more efficient than braving congested airports.

Unsold seats

Embraer, which started out making planes for the Brazilian air force, is a leading manufacturer of regional jets sitting between 50 and 120 passengers and which feed into big airline networks. Since 2002 it has expanded into small executive jets.

Although many passengers reach their destinations fuming about overcrowded aircraft, many airlines only manage current high load factors by selling unsold seats at a discount.

That masks a deeper industry problem of overcapacity as the economy heads towards recession, Chiessi said.