IATA now forecasts a return to profit in 2023

The near-universal outbreak of the Covid pandemic has finally borne fruit in air transport. According to IATA, the sector should return to profitability in 2023, following a year of significantly reduced losses in 2022 compared with 2020 and 2021. According to the International Air Transport Association, airlines should post a small net profit of 4.7 billion dollars in 2023. This would represent a net profit margin of 0.6 %. This would be the first profit since 2019. That year, net profits in the air transport sector reached $26.4 billion, representing a margin of 3.1 %.

Reduced losses by 2022

2022 should, however, end with further losses. IATA relies on a net loss of $6.9 billion. However, this is a real improvement on IATA's previous forecast published last June. At that time, the association estimated a net loss of 9.7 billion dollars.

These figures should be compared with the colossal losses incurred by Covid over the last two years. In 2020, the airlines recorded a loss of 137.7 billion US$. By 2021, losses had fallen back to 42 billion.

" Resilience was the hallmark of the airlines during the Covid-19 crisis. By 2023, this financial turnaround will have materialised with the industry's first profit since 2019. This is a major achievement given the scale of the financial and economic damage caused by the restrictions imposed by governments with the pandemic. However, a profit of $4.7 billion on sector revenues of $779 billion also illustrates that there is still a long way to go to put the global industry on a sound financial footing." says Willie Walsh, Director General of IATA.

" Many companies are sufficiently profitable to attract the capital needed to move the sector forward as it decarbonises. But many others are in difficulty for a variety of reasons. These include onerous regulations, high costs, inconsistent government policies, inefficient infrastructures and a value chain where the benefits of a connected world are not equitably distributed" Willie Walsh continues.

Passenger demand below forecasts

The improvement in the outlook for 2022 is largely due to the strengthening of yield and cost control in the face of rising fuel prices. Passenger yields this year will have risen by 8.4 %, i.e. estimated passenger revenues of $438 billion (compared with $239 billion in 2021).

Air freight revenues played a decisive role in the improvement in results, with a forecast of 201.4 billion dollars. Overall, the airline business is expected to generate revenues of $727 billion, an increase of 43.6 % compared with 2021.

The return of passenger demand remains, however disappointing. IATA now estimates that by 2022 passenger traffic will have reached 70.6% of the pre-crisis level. This compares with a forecast of 82.4% in June. The fall in world GDP growth forecasts (from 3.4 % in June to 2.9 %) and the Covid-19 restrictions still in force in several markets, notably China, have weighed negatively on this demand. The rise in paraffin prices is another negative factor influencing an increase in air fares, weighing on demand.

2023 will see a return to profit

A return to breakeven and profits is therefore planned for 2023. Willie Walsh explains in detail. " Despite the economic uncertainties, there are many reasons to be optimistic. optimistic by 2023. The fall in oil price inflation and continuing strong demand, held back by Covid, should help to control costs and boost growth. However, with such slim margins, a tiny variation in any one of these variables can tip the balance into negative territory. The vigilance and the flexibility will therefore be essential" concluded IATA's CEO.