Airlines industry might bounce back to profitability in 2023
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New Delhi: The International Air Transport Association (IATA) hopes to return back to profitability in 2023 as the airline industry is cutting the losses incurred out of the Covid-19 pandemic.
The airlines are expected to post a small net profit of $4.7 billion, a 0.6 per cent net profit margin, in 2023. This will be the first profit since 2019 when the pandemic broke out when the industry net profits were $26.4 billion, and the net per cent profit margin was 3.1.
IATA said that airlines' net losses are expected to be $6.9 billion (an improvement on the $9.7 billion loss for 2022 in IATA's June outlook) in 2022. This is a considerable improvement from the losses of $42.0 billion and $137.7 billion that were realised in 2021 and 2020, respectively.
"Resilience has been the hallmark of airlines during the Cocvid-19 crisis. As we look to 2023, the financial recovery will take shape with the first industry profit since 2019. That is a great achievement considering the scale of the financial and economic damages caused by government-imposed pandemic restrictions. But a $4.7 billion profit on industry revenues of $779 billion also illustrates that there is much more ground to cover to put the global industry on a solid financial footing.
"Many airlines are sufficiently profitable to attract the capital needed to drive the industry forward as it decarbonises. But many others are struggling for a variety of reasons. These include onerous regulation, high costs, inconsistent government policies, inefficient infrastructure and a value chain where the rewards of connecting the world are not equitably distributed," said Willie Walsh, IATA's Director General.
In 2022, conditions improved mainly from strengthened yields and strong cost control in the face of rising fuel prices. Passenger yields are expected to grow by 8.4 per cent, up from the 5.6 per cent anticipated in June. Propelled by that strength, passenger revenues are expected to grow to $438 billion, up from $239 billion in 2021. The total revenue is expected to increase by 43.6 per cent compared to 2021, reaching an estimated $727 billion, IANS reported.
The forecast of profitability in 2023 is expected despite growing economic uncertainties as global GDP growth slows to 1.3 per cent from 2.9 per cent in 2022.
Walsh said, "Despite the economic uncertainties, there are plenty of reasons to be optimistic about 2023. Lower oil price inflation and continuing pent-up demand should help keep costs in check as the strong growth trend continues. At the same time, with such thin margins, even an insignificant shift in any one of these variables has the potential to shift the balance into negative territory. Vigilance and flexibility will be key."