Global airline sector on track to regain small profit by 2023
“Razor thin” profit margin would mark first net gain since 2019, as covid shutdowns rocked the industry.
The global airline industry is on track to return to profitability in 2023 after suffering deep financial losses during the pandemic years, the International Air Transport Association (IATA) said today.
According to IATA’s forecast, airlines are expected to post a small net profit of $4.7 billion in 2023, which would represent a thin, 0.6% net profit margin. If realized, that would mark the sector’s first profit since 2019, when industry net profits were $26.4 billion, showing a 3.1% net profit margin.
In the meantime, airlines have been hit hard by covid-era travel bans and business lockdowns. The industry is expected to post a net loss of $6.9 billion for 2022, after ringing up losses of $42.0 billion in 2021 and $137.7 billion in 2020.
“As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. That is a great achievement considering the scale of the financial and economic damage caused by government imposed pandemic restrictions,” Willie Walsh, IATA’s director general, said in a release.
Despite that progress, Walsh noted that the industry still has much ground to cover before it regains a solid financial footing, as evidenced by its mere $4.7 billion of profit on estimated 2023 industry revenues of $779 billion.
“Many airlines are sufficiently profitable to attract the capital needed to drive the industry forward as it decarbonizes. 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,” Walsh said.
Overall revenues for 2022 are expected to grow by 43.6% compared to 2021, reaching an estimated $727 billion. Of that total, air cargo revenues have played a key role in cutting losses, with revenues expected to reach $201.4 billion. That is an improvement compared with the June forecast, largely unchanged from 2021, and more than double the $100.8 billion earned in 2019, IATA said.
“The expected profits for 2023 are razor thin. But it is incredibly significant that we have turned the corner to profitability,” Walsh said. “The challenges that airlines will face in 2023, while complex, will fall into our areas of experience. The industry has built a great capability to adjust to fluctuations in the economy, major cost items like fuel prices, and passenger preference. We see this demonstrated in the decade of strengthening profitability following the 2008 Global Financial Crisis and ending with the pandemic. And encouragingly, there are plenty of jobs and the majority of people are confident to travel even with an uncertain economic outlook.”