Airlines Will Return to Profitability in 2023 After Three-Year Slump
The global airline industry is predicted to make a profit this after three consecutive years of losses
The International Air Transport Association (IATA) forecasts that the global airline industry will post a “razor-thin” net profit of $4.7 billion this year, returning to profitability after three years of losses during the coronavirus crisis.
The profits will be modest: a net profit margin of just 0.6% on revenues of $779 billion and a fraction of the $26.4 billion profit the industry made in 2019 (3.1% net profit margin).
However, according to IATA director general Willie Walsh, the forecasts represent a “step in the right direction” for an industry shaken by pandemic travel restrictions and successive staff shortages.
Worldwide, airlines have hemorrhaged billions of dollars since the coronavirus crisis began closing borders, stifling consumer demand, and ravaging economies nearly three years ago.
In 2020, with strict lockdowns imposed worldwide and planes grounded, carriers lost a collective $137.7 billion. The following year, although air traffic had resumed in many locations, airlines were hobbled by staff shortages and supply chain disruptions and made losses amounting to $42 billion.
Labor shortages, strikes, and global economic turmoil resulting from the energy crisis and the Russian invasion of Ukraine further complicated operations in 2022. But with coronavirus restrictions fading, the industry edged closer to profitability. As a result, IATA expects industry-wide losses to amount to $6.9 billion last year, down from an initial forecast of $9.7 billion.
Going into 2023, the industry faces headwinds, including economic turbulence, high energy costs, China’s coronavirus outbreak, and labor and skills shortages. But “these challenges are relatively small compared to what we’ve come through,” Walsh said.
“That’s why we’re optimistic that we can manage a way through these and get the industry back into very small levels of profitability, but profitability nonetheless,” he added.
In 2023, rebounding passenger numbers should boost profits, accounting for revenues of $522 billion. Consumer demand is forecasted to reach 85.5% of 2019 levels, with 4.2 billion travelers taking to the skies. However, ticket prices will fall as slackening fuel prices are passed through to customers.
Those customers can expect a smoother ride as the cancellations, delays, baggage chaos, and long security lines that frustrated them in 2022 end.
“I think most of that is behind us,” Walsh said. “We should be confident that those issues have been resolved. Certainly, there is absolutely no excuse for the airports not to deliver on good service as we go into 2023.”
Meanwhile, cargo markets will still account for a significant portion of airlines’ revenues, although they’ll be less critical than during the pandemic. Economic turmoil will depress cargo volumes to 57.7 million tonnes, down from a peak of 65.6 million tonnes in 2021. That will push $149.4 billion, $52 billion less than in 2022 but still $48.6 billion more than in 2019.
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