The airline industry is expected to record a net profit of $9.8 billion with rising passenger traffic and revival of the local economies. International Air Transport Association (IATA) announced an expected strengthening of airline industry profitability in an upgrade of its outlook for 2023. IATA further forecasts the airline industry operating profits to reach $22.4 billion in 2023 over the December forecast of a $3.2 billion operating profit. It is also more than double the $10.1 billion operating profit estimated for 2022.
“Stronger profitability is supported by several positive developments. China lifted COVID-19 restrictions earlier in the year than anticipated. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, although still high, have moderated over the first half of the year,” said Willie Walsh, IATA’s Director General.
As for passenger numbers, IATA anticipates 4.35 billion people to travel in 2023 close to the 4.54 billion who flew in 2019 with passenger revenues expected to reach $546 billion.
The forecast for cargo sector is moderate with volumes expected to be 57.8 million tonnes, below the 61.5 million tonnes carried in 2019 with a sharp slowing of international trade volumes. Cargo revenues are expected to be $142.3 billion. While that is down sharply from $210 billion in 2021 and $207 billion in 2022, it is well above the $100 billion earned in 2019.
IATA expects the total revenue to grow 9.7% year over year to $803 billion. IATA predicts that this will be the first time that the industry revenues will top the $800 billion mark since 2019
“Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep COVID-19 losses, even a net profit margin of 1.2% is something to celebrate! But with airlines just making $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines,” said Walsh.
The IATA report estimates net industry losses for 2022 are to be -$3.6 billion, a strengthening from the previously estimated -$6.9 billion loss.
Going ahead, IATA focuses on sustainability as the priority for 2023.
“Priorities for 2023 include SAF production incentives to accelerate progress toward net zero carbon emissions, ensuring the integrity of CORSIA as the economic measure applied to international aviation, eliminating inefficiencies in air traffic management and applying global standards consistently,” added Walsh.
The IATA report concludes on the note that while the global airline industry is expected to return to profit in 2023, financial performance across regions remains diverse.
The positive news is that industry financials are improving in all regions from the COVID-related depths of 2020, although not all regions are expected to deliver a profit this year.