BackIATA expects global airlines to post $6.9 bn loss in 2022, razor-thin profit in 2023
IATA expects airlines to post a global net profit of $4.7 billion on revenues of $779 billion with 0.6% net margin in 2023
PremiumGlobal airlines body International Air Transport Association expects airlines across the globe to post a net loss of around $6.9 billion in 2022 and record razor-thin profits of $4.7 billion in 2023.
Since 2019, globally, airlines have posted a net loss due to the suspension of flight services and restrictions due to the onset of covid pandemic. The airlines across the world realized losses of $42 billion and $137 billion in 2021 and 2020 respectively.
IATA expects airlines to post a global net profit of $4.7 billion on revenues of $779 billion with 0.6% net margin in 2023.
Passenger demand is expected to reach 85.5% of 2019 levels over the course of 2023 but passenger yields are expected to soften by 1.7%. With economic uncertainty, cargo volumes are expected to decrease to 57.7 million tonnes, from a peak of 65.6 million tonnes in 2021. IATA expects a fall of 22.6% in cargo yields, mostly in the latter part of the year. Cargo yields grew by 52.5% in 2020, 24.2% in 2021 and 7.2% in 2022.
IATA expects the total fuel spend for 2023 to be $229 billion assuming Brent crude at $92.3/barrel and jet kerosene at $111.9/barrel taking into account a relative stabilization of fuel supply after the initial disruptions from the war in Ukraine. The assumption for jet kerosene for 2022 is $138.8/barrel.
The outlook anticipates a gradual re-opening of China to international traffic and the easing of domestic Covid-19 restrictions progressively from the second half of 2023. A prolongation of China’s zero Covid policies would adversely affect the outlook, IATA cautioned.
“Each passenger carried is expected to contribute on average just $1.11 to the industry’s net profit. In most parts of the world that’s far less than what is needed to buy cup of coffee. Airlines must remain vigilant to any increases in taxes or infrastructure fees" Walsh said.
For 2022, IATA has revised the net loss estimate downwards to $6.9 billion from $9.7 billion which was expected as per its June 2022 outlook for the next year. The improvement for the current year is expected on the basis of better yields and strong cost control by airlines in the face of rising fuel prices.
Passenger yields are expected to grow by 8.4% and passenger revenues for the current year are estimated to grow to $438 billion for the global airlines industry, as per IATA. Air cargo, which has emerged as a saving grace for airlines in view of decline in passenger revenues, is expected to continue with its strong performance at $201.4 billion of revenues, nearly double of $100.8 billion earned in 2019. This is expected to take the total revenue level to $727 billion, 44% up as compared to 2021. Cost pressures still remain for the sector from labour, infrastructure, skill, and capacity shortages.
For the next year, the airline industry is expected to tip into profitability but this will be largely led by airlines in North America, followed by Europe and Middle East.
“Without question, the recovery is strong and has got a momentum. Exception to that is what is happening China and the knock-on effect on Asia," IATA Director General Willie Walsh said, adding that domestic markets are broadly back to where they were and international markets are still recovering.
He added that covid is clearly endemic now, with the exception of China, most countries have relaxed covid-related travel restrictions now.
IATA represents around 290 airlines comprising 89% of global air traffic.
“We’ll end the year at about 70% of 2019 passenger volumes. But with yield improvement in both cargo and passenger businesses, airlines will reach the cusp of profitability," said Walsh.
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