Airlines will return to profitability in 2023 after three-year slump, industry body says

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The global airline industry is set to return to profitability again next year following a near-three year downturn fueled by the Covid-19 pandemic, an industry body said Tuesday.

The International Air Transport Association (IATA) said it expects the industry to post a “small” net profit of $4.7 billion in 2023, with more than 4 billion passengers set to take to the skies.

Director General Willie Walsh told CNBC the predictions marked a “step in the right direction” for an industry clobbered by pandemic-induced travel restrictions and resultant staff shortages.

“The recovery is going well,” Walsh told CNBC’s Julianna Tatelbaum. “[There’s] still a long way to go to get back to where we were in 2019, but we are heading in the right direction.”

The forecasted uplift, outlined in a new report, points to the first profitable year for the airline business since 2019, when net profits were $26.4 billion, and signal an improvement on the association’s June outlook, when it said profitability was “within reach.”

For 2022, IATA also reduced its forecast for industry-wide losses to $6.9 billion from $9.7 billion in June’s outlook.

Challenges ahead ‘relatively small’

The airline industry has been hemorrhaging billions of dollars in recent years as coronavirus health restrictions have weighed on air travel and consumer demand.

In 2020, during the first year of the pandemic, the airline industry suffered losses of $137.7 billion, according to IATA. In 2021, those losses narrowed only partially to $42 billion as staff shortages and other disruptions continued to hamper the industry even as air travel in some places substantially resumed.

There will be challenges in 2023. But, quite honestly, these challenges are relatively small compared to what we’ve come through.
Willie Walsh
Willie Walsh, director general, IATA

Still now, wider pressures continue to weigh on the industry and the wider global economy, Walsh noted. But he said the industry is now better positioned to weather potential headwinds going forward.

“There will be challenges in 2023,” Walsh said. “But, quite honestly, these challenges are relatively small compared to what we’ve come through.”

“That’s why we’re optimistic that we can manage a way through these and get the industry back into very small levels of profitability, but profitability nonetheless,” he added.

Travel disruption set to ease

The airline industry is forecast to record total revenues of $779 billion in 2023, according to IATA, led primarily by a continued rebound in passenger demand.

North America is set to lead the charge, posting the greatest profit, followed by Europe and the Middle East. Covid-19 restrictions in China, however, will continue to weigh on travel demand in the Asia-Pacific region, which, alongside Latin America, is forecast to record additional losses next year.

“Passenger demand is expected to reach 85.5% of 2019 levels over the course of 2023 … with 4.2 billion travelers expected to fly,” the report said.

Flight cancellations, delays and staff walkouts became commonplace at many major airport in 2022 as airlines struggled to handle increased demand following staff layoffs.
Andreas Solaro | Afp | Getty Images

Cargo markets, meanwhile — which became a source of life support for airlines during the pandemic — will continue to account for a sizeable share of revenues in 2023, albeit at a lower level than recent years.

“Revenues are expected to be $149.4 billion, which is $52 billion less than 2022 but still $48.6 billion stronger than 2019,” according to the report.

The report also noted that higher costs relating to energy prices and labor, skill and capacity shortages will continue to weigh on revenues but at a lower level.

The forecasts follow a chaotic year for air travel, with flight cancellations, delays and staff walkouts commonplace at many major airports. However, Walsh said he thinks most of that disruption is now over, and passengers should expect a smoother travel experience going forward.

“I think most of that is behind us,” said Walsh. “We should be confident that those issues have been resolved. Certainly there is absolutely no excuse for the airports not to deliver on good service as we go into 2023.”

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