The global airline industry is set to return to profitability again next year following a downturn of nearly three years fueled by the Covid-19 pandemic, according to the International Air Transport Association (IATA).
The industry body predicted a small net profit of $4.7 billion in 2023, with more than 4 billion passengers expected to travel. Net losses are expected to reach $6.9 billion in 2022 (an improvement on the $9.7 billion loss for 2022 in IATA’s June outlook), significantly better than losses of $42.0 billion and $137.7 billion in 2021 and 2020 respectively.
“Resilience has been the hallmark for airlines in the COVID-19 crisis. As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. That is a great achievement considering the scale of the financial and economic damage caused by government imposed pandemic restrictions,”said Willie Walsh, Director General of IATA.
“But a $4.7 billion profit on industry revenues of $779 billion also illustrates that there is much more ground to cover to put the global industry on a solid financial footing. Many airlines are sufficiently profitable to attract the capital needed to drive the industry forward as it decarbonizes. But many others are struggling for a variety of reasons. These include onerous regulation, high costs, inconsistent government policies, inefficient infrastructure and a value chain where the rewards of connecting the world are not equitably distributed.”
As the pandemic struck in 2020, the airline industry suffered losses of $137.7 billion. Staff shortages, travel restrictions and other disruptions continued to hamper the industry in 2021, resulting in a loss of $42 billion.
Buoyed by a continuing rebound in passenger demand, the airline industry is forecast to record total revenues of $779 billion in 2023, according to IATA.
A recent IATA poll of travellers in 11 global markets revealed that nearly 70% are travelling as much or more than they did prior to the pandemic. While the economic situation is concerning to 85% of travellers, 57% have no intention to curb their travel habits.
North America is expected to post the greatest profit, followed by Europe and the Middle East. Covid-19 restrictions in China, however, will continue to weigh on travel demand in the Asia-Pacific region, which, alongside Latin America, is forecast to record additional losses next year.
According to the report, cargo markets will continue to account for a sizeable share of revenues in 2023 ($149.4 billion), which is $52 billion less than 2022 but still $48.6 billion stronger than 2019.
The report also noted that higher energy and labour costs, as well as skill and capacity shortages will continue to weigh on revenues but at a lower level.
“Despite the economic uncertainties, there are plenty of reasons to be optimistic about 2023. Lower oil price inflation and continuing pent-up demand should help to keep costs in check as the strong growth trend continues. At the same time, with such thin margins, even an insignificant shift in any one of these variables has the potential to shift the balance into negative territory. Vigilance and flexibility will be key.” said Walsh.
The International Air Transport Association represents some 300 airlines comprising 83% of global air traffic.