The International Air Transport Association (IATA) has announced today that it expects the airline industry to return to profitability in 2023. The announcement comes as part of its Global Media Days in Geneva, where it outlined its expectations for the coming year. Let’s take a closer look at what this means for aviation.
2022 is set to be the last loss-making year of the crisis
The last few years have been a challenge for the aviation industry, with the coronavirus pandemic bringing airlines screeching to a halt in 2020. With the effects of the global health crisis lessening, 2022 looked set to be a year of recovery. While this has largely been the case, there have also been certain hurdles along the way.
Indeed, the conflict between Russia and Ukraine has prompted cuts and changes to routes that would normally use these countries’ airspace. Meanwhile, airports have faced overcrowding due to the boom in demand not being met by adequate staffing levels, with industrial action also have proved to be a disruptive factor.
As a result of these aspects, among others, IATA’s latest projections show that 2022 will be a loss-making year for the industry. However, at $6.9 billion, aviation’s net losses look set to be far lower than in 2020 and 2021 ($137.7 and $42 billion, respectively). This figure is also better than the $9.7 that was predicted in June.
Back on form
However, there are now clearer skies ahead, if IATA’s predictions are to be believed. Indeed, the group has projected that the airline industry will return to profitability in 2023, with an overall net profit of $4.7 billion. This is an important step forward in aviation recovery, although there is still a way to go before 2019’s figures are hit.
Indeed, that year saw a net profit of $26.4 billion, at a margin of 3.1%. Meanwhile, next year’s profit is projected to represent a margin of just 0.6%. In any case, IATA’s projections will be a welcome relief to an industry that has faced unprecedented challenges in recent years. Willie Walsh, the group’s Director General, stated:
“Resilience has been the hallmark for airlines in the COVID-19 crisis. As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. This is a great achievement considering the scale of the financial and economic damage caused by government-imposed pandemic restrictions.”
Several factors at play
IATA outlined various reasons as to why next year will represent a long-awaited return to profitability for the airline industry. High passenger demand will play a key role, with the overall figure for this expected to be around 85.5% of the levels seen in 2019. This will also be the first year since before the onset of the coronavirus pandemic that more than 4 billion passengers fly (4.2 billion projected).
Meanwhile, cargo traffic is expected to remain above pre-pandemic levels. While 2023’s predicted revenues of $149.4 billion will see a $52 billion drop in this regard compared to 2022, they will still be $48.6 billion higher than in 2019. While the present economic uncertainty is a factor in cargo’s projected decline, the fact that it is still expected to outperform 2019 despite this is an encouraging sign.
Source: simpleflying.com