The International Air Transport Association (IATA) has revised its profitability outlook for 2023. Airline industry net profits are now expected to reach US$9.8 billion - a 1.2% net profit margin -- more than double the previous forecast of $4.7 billion.
Airline industry operating profits are expected to reach US$22.4 billion in 2023, much improved over the December forecast of a US$3.2 billion operating profit. It is also more than double the US$10.1 billion operating profit estimated for 2022.
Some 4.35 billion people are expected to travel in 2023, a number approaching the 4.54 billion who flew in 2019.
Total revenues are expected to grow 9.7% year over year to US$803 billion. This is the first time that industry revenues will top the US$800 billion mark since 2019 (US$838 billion). Expense growth is expected to be contained to an 8.1% annual increase.
IATA Director General Willie Walsh. (International Air Transport Association Media)
"Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments. China lifted COVID-19 restrictions earlier in the year than anticipated. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, although still high, have moderated over the first half of the year," said Willie Walsh, IATA's Director General.
IATA calls the return to net profitability, even with a slim 1.2% net profit margin, a major achievement. First, it was achieved at a time of significant economic uncertainties. And second, it follows the deepest losses in aviation's history (US$183.3 billion of net losses for 2020-2022 (inclusive) for an average net profit margin of -11.3% over that period).
It should be noted that the airline industry entered the COVID-19 crisis at the end of a historic profit streak that saw an average net profit margin of 4.2% for the 2015-2019 period.
"Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep COVID-19 losses, even a net profit margin of 1.2% is something to celebrate! But with airlines just making $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines," said Walsh.
While the global airline industry is expected to return to profitability in 2023, financial performance across regions remains diverse. The positive news is that industry financials are improving in all regions from the COVID-related depths of 2020, although not all regions are expected to deliver a profit this year.
North America remains the standout region in terms of financial performance. Consumer spending has remained solid, despite cost-of-living pressures, and the demand for air travel remains robust; air passenger demand is forecast to exceed its pre-COVID (2019) level this year.
"Resilience is the story of the day and there are many good reasons for optimism. Achieving profitability at an industry level after the depths of the COVID-19 crisis opens up much potential for airlines to reward investors, fund sustainability, and invest in efficiencies to connect the world even more effectively," said Walsh.
"That's a big 'to do' list to achieve with just a 1.2% net profit margin. That's why we call on governments to keep their focus on initiatives that will strengthen safe, sustainable, efficient, and profitable connectivity."
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