The International Air Transport Association (IATA) expects a return to profitability for the global airline industry in 2023, as airlines continue to cut losses stemming from the effects of the Covid-19 pandemic to their business in 2022.
In 2023, airlines are expected to post a small net profit of $4.7 billion — 0.6 per cent net profit margin. It will be the first profit since 2019 when the industry net profits were $26.4 billion (3.1 per cent net profit margin).
In 2022, airlines’ net losses are expected to be $6.9 billion (an improvement on the $9.7 billion loss for 2022 in IATA’s June outlook). This is significantly better than the losses of $42.0 billion and $137.7 billion that were realised in 2021 and 2020, respectively, IATA said.
“Resilience has been the hallmark for airlines during the Cocvid-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 damages caused by government imposed pandemic restrictions. 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 decarbonises. 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,” said Willie Walsh, IATA’s Director General.
Improved prospects for 2022 stem largely from strengthened yields and strong cost control in the face of rising fuel prices. Passenger yields are expected to grow by 8.4 per cent, up from the 5.6 per cent anticipated in June. Propelled by that strength, passenger revenues are expected to grow to $438 billion, up from $239 billion in 2021. Overall revenues are expected to grow by 43.6 per cent compared to 2021, reaching an estimated $727 billion.
In 2023, the airline industry is expected to tip into profitability. Airlines are anticipated to earn a global net profit of $4.7 billion on revenues of $779 billion (0.6 per cent margin). This expected improvement will come despite growing economic uncertainties as global GDP growth slows to 1.3 per cent, from 2.9 per cent in 2022.
“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 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.