IATA: Global Airline Industry Turns Profitable Despite Cost-of-living Crisis

Global airline industry net profits are set to reach 9.8 billion dollars in 2023 with a 1.2 percent net profit margin more than double the previous forecast of 4.7 billion dollars in December 2022, said the International Air Transport Association (IATA) in its revised outlook for the year ahead.

Presented during the 79th IATA Annual General Meeting (AGM) in Istanbul, Turkey, the data says that some 4.35 billion people are expected to travel in 2023, fast approaching pre-Covid 2019 figures of 4.54 billion.

According to the association, airline sector operating profits are expected to reach 22.4 billion dollars this year, more than double the 10.1-billion-dollar operating profit forecast for 2022.

Total revenues for the industry are forecast to grow by 9.7 percent year-on-year to 803 billion dollars exceeding for the first time since Covid-19 the 800-billion-dollar mark since 2019 and 838 billion dollars.

Expense growth is expected to be contained to an 8.1 percent annual increase.

Cargo volumes are expected to be 57.8 million tons, down on the 61.5 million tons carried in 2019.

IATA Director General Willie Walsh reporting on the air transport industry during the association’s 79th Annual General Meeting (AGM) and World Air Transport Summit in Istanbul, Turkey. Photo source: IATA

“Airline financial performance in 2023 is beating expectations. 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 IATA Director General Willie Walsh.

IATA’s chief goes on to add that despite the cost-of-living crisis, desire to travel is still strong, “even as ticket prices absorbed elevated fuel costs”. He underlined however that airlines are making 2.25 dollars 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.

IATA sees the industry’s return to net profitability, even with a 1.2 percent net profit margin, as a major feat as it was achieved at a time of significant economic uncertainties and it follows the heaviest losses in the history of aviation.

Other key takeaways of the IATA revised forecast include:

– revenues are rising (9.7 percent) faster than expenses (8.1 percent), boosting profitability
– revenues are expected to reach $803 billion in 2023 up by 9.7 percent on 2022 but still down by 4.1 percent on 2019
– a total of 34.4 million flights is expected to be available in 2023 up by 24.4 percent on 2022, but still down by 11.5 percent on 2019
– passenger revenues are set to reach 546 billion dollars up by 27 percent on 2022, but down by 10 percent on 2019
– the industry is expected to reach 87.8 percent of 2019 levels of revenue passenger kilometers (RPKs) in 2023
– high demand for travel in many markets is keeping yields strong with a modest 1.1 percent decline expected in 2023 compared to 2022 levels
– expected average passenger load factor is at 80.9 percent for 2023 near the 2019 record performance of 82.6 percent
– cargo revenues are expected to amount to 142.3 billion dollars
– expenses are set to grow to 781 billion dollars up by 8.1 percent on 2022 and down by 1.8 percent on 2019
– jet fuel costs are expected to average 98.5 dollars per barrel in 2023 for a total fuel bill of 215 billion dollars cheaper than the 111.9 dollars / barrel forecast last and the average cost of 135.6 dollars in 2022
– total non-fuel fuel costs are expected to reach 565 billion dollars in 2023
– risks to recovery and growth include inflation, recession possibility leading a loss of jobs, the Russia-Ukraine war, supply chain issues, and regulatory cost burdens.

Photo source: IATA

In terms of regional performance, European carriers were able to return to profit in 2022 and profitability is set to strengthen further in 2023. Indicatively, 41 percent of travelers said they expect to travel more in the next 12 months than in the previous year and 49 percent expect to undertake the same level of travel. Moreover, 77 percent said they were already traveling as much or more than they did pre-pandemic.

“Resilience is the story of the day and there are many good reasons for optimism,” said Walsh.