Credit rating business DBRS Morningstar expects the global airline industry to benefit from the return to pre-pandemic travel and the relaxation of China's 'zero Covid' regime but warns the sector is vulnerable to recession and falling consumer spending power.
While airlines are likely to continue on a "path toward normalisation" in 2023, DBRS said in a January 17 report, the second half of the year (H2 2023) "could be tough for airlines because consumers may pull back from nonessential spending as they feel the full heat of a macroeconomic downturn and reduced purchasing power".
Citing the slow return to pre-pandemic business travel levels and the possible spillover effects of the war in Ukraine, as well as concerns about tensions across the Taiwan Strait, DBRS said it has a 'neutral' outlook for the industry in 2023, despite the recent revival of leisure travel demand.
Other headwinds, according to DBRS, are likely to include falling air cargo demand and rising insurance prices. And while fuel costs should come down after a pricey 2022, carriers will likely need to pass those on to passengers if consumer spending power is further squeezed by inflation. Budget airlines could in turn see their market shares increase, DBRS said.