ISTANBUL — Airline industry net profits are expected to reach US$9.8 billion in 2023, and that’s more than double the previous forecast (December 2022) of $4.7 billion, says IATA.
IATA provided an update about airline industry profitability at its 79th AGM, taking place this week in Istanbul.
The revised forecast comes with an anticipated 1.2% net profit margin. IATA also says airline industry operating profits are expected to reach $22.4 billion in 2023, “much improved” over the December forecast of a $3.2 billion operating profit. It is also more than double the $10.1 billion operating profit estimated for 2022.
Some 4.35 billion people are expected to travel in 2023. That’s getting closer to the 4.54 billion passengers who flew in 2019.
Total revenues are expected to grow 9.7% year over year to $803 billion. This is the first time that industry revenues will top the $800 billion mark since 2019 ($838 billion).
“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.
The return to net profitability, even with a 1.2% net profit margin, is a major achievement, Walsh added.
He notes that it’s been achieved at a time of significant economic uncertainties. And second, it follows the deepest losses in aviation’s history: $183.3 billion of net losses for 2020-2022 inclusive for an average net profit margin of -11.3% over that period. 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.
Regionally, North America remains the standout in terms of the airline industry’s 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, says IATA.
“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. 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,” said Walsh.
“Priorities for 2023 include SAF production incentives to accelerate progress toward net zero carbon emissions, ensuring the integrity of CORSIA as the economic measure applied to international aviation, eliminating inefficiencies in air traffic management and applying global standards consistently,” said Walsh.
Walsh noted that a recent IATA poll of travelers in 11 global markets revealed that 81% of those surveyed emerged from the pandemic with a greater appreciation of the freedom that flying makes possible. The same study also demonstrated the important role that travelers see the airline industry playing:
- 90% said that connectivity by air is critical to the economy
- 91% said that air travel is a necessity for modern life
- 88% said that air travel has a positive impact on societies
- 82% said that the global air transport network is a key contributor to the UN Sustainable Development Goals (SDGs)
- 96% expressed satisfaction with their last flight, and
- 77% said that flying was good value for money.
2024 AGM TO TAKE PLACE IN DUBAI
Also this week in Istanbul, IATA announced the 80th IATA AGM and World Air Transport Summit will take place in Dubai, on June 2-4, 2024.
“We look forward to gathering the aviation industry in Dubai for the 80th IATA AGM in 2024. Dubai is a dynamic city and a major aviation hub connecting the world. The UAE’s positive approach to aviation has built a strong airline with a strong hub airport. Together, these make an enormously powerful and positive contribution to the society and economy of the UAE. Holding the AGM in Dubai will be a showcase of what can be achieved by aviation with supportive government policies and decisions,” said Walsh.
Emirates will serve as the host airline for the events.
“Emirates is delighted to host the 80th IATA AGM and World Air Transport Summit. We look forward to welcoming all our aviation industry colleagues to Dubai in 2024,” said Sir Tim Clark, President, Emirates Airline.