Airlines: return to profitability “within reach” in 2023

On the back of optimism after two and a half years of COVID-19, airlines expect to cut losses this year and return to positive territory in 2023 on the back of a strong recovery in passenger demand.

The sector is still expected to lose a cumulative $9.7 billion this year, but it will be a “huge improvement” after $137.7 billion in 2020 and $42.1 billion in 2021, the International Transport Association pointed out. (IATA), which brings together the vast majority of airlines and holds its annual general meeting in Doha.

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“Sector-level profitability in 2023 appears within reach, as (airlines) in North America are expected to generate $8.8 billion in profits by 2022,” Iata said in a statement.

In addition, “strong latent demand, the lifting of movement restrictions in most markets, low unemployment in most countries and personal savings are fueling a recovery which will result in passenger numbers reaching 83% of the level before the pandemic” this year, assured the organization.

IATA still sees attendance returning to pre-crisis figures in 2024.

The health crisis torpedoed the air sector, which lost 60% of its customers in 2020. In 2021, attendance had only risen to 50% of the 4.5 billion passengers in 2019.

In terms of turnover, the companies expect to return in 2022 to 93.3% of the levels of 2019. At 782 billion dollars, it will be a jump of 54.5% over one year.

This increase will be fueled by revenue from passenger transport, which will “more than double” over one year to 498 billion dollars, while freight revenue will fall slightly to 191 billion dollars against 204 billion the previous year, but still at a “double tier” of 2019.

Freight was one of the few oxygen balloons in the aviation sector during the crisis.

“Optimism is in order, although there are still cost challenges, particularly jet fuel, and continued restrictions in some key markets,” Iata chief executive Willie Walsh said. quoted in the text.

Indeed, the invasion of Ukraine by Russia and the sanctions against Moscow have pushed the price of hydrocarbons to new heights. Fuel will represent some 24% of airline costs in 2022, compared to 19% in 2021, according to IATA.

The organization has identified several “risk factors” that could alter its forecasts, first and foremost the war in Ukraine. The closure of Russian airspace to many long-haul carriers forces them to make costly detours.

Additional challenges: shortages of pilots in the United States and of handlers and security guards at some European airports. There are “difficulties, but it is not generalized”, tempered Mr. Walsh, for whom these dysfunctions will disappear in the long term.

Another cloud on the horizon is high inflation which is eroding consumers’ purchasing power, although airlines, which have already started raising fares, could benefit from higher prices and interest rates, which would reduce the service of their debts contracted at lower rates.

These reach approximately 650 billion dollars cumulatively, according to the chief economist of Iata, Marie Owens Thomsen.

Weakened by the crisis, companies must currently both clean up their finances and invest massively to reduce their net CO2 emissions to zero by 2050, an objective recalled on Monday by Iata which urged countries to endorse it in the fall at the level of the International Civil Aviation Organization (ICAO), a UN agency.

And finally, the pandemic continues and the emergence of new variants could again cause border closures, fears Iata, considering that it is “not an effective means of controlling contamination”.

China’s domestic market is still affected by restrictions and IATA has warned that the ‘zero Covid’ policy, if persisted, “will continue to depress the world’s second-largest domestic market and wreak havoc on global logistics”.

IATA will hold its next General Assembly in June 2023 in Istanbul (Turkey).

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