Airlines to be back in profit in 2023 as demand for travel increases

Airlines to be back in profit in 2023 as demand for travel increases

THE airline industry is set to achieve its first post-pandemic profit next year as travel rebounds.

THE airline industry is set to achieve its first post-pandemic profit next year, as a travel rebound offsets the impact of ongoing Covid-19 curbs in China, the International Air Transport Association (IATA) predicted.

Carriers will likely generate a collective $4.7bn (€4.5bn) in profits in 2023, said IATA in an update to its financial outlook. While less than a fifth of the level seen in 2019, it is still a welcome development after years of disruption.

The recovery will remain patchy, the trade group says. North American carriers should rack up $11.4bn in earnings, yet only two other regions — Europe and the Middle East — are likely to halt losses and eke out small gains. Asia is set to suffer a $6.6bn deficit, even assuming that China begins to reopen to international traffic in the second half of 2023.

The threat of recession and uncertainty over interest rates and oil prices also pose downside risks.

“Airline profitability is razor thin,” said IATA director general Willie Walsh.

The job of airline managements will remain challenging as careful watch on economic uncertainties will be critical.” Mr Walsh was the formerly boss at IAG, which owns Aer Lingus and British Airways.

Next year’s net income will equate to the equivalent to $1.11 per passenger on average, less than the price of a cup of airport coffee, he said. IATA had not previously issued earnings forecasts for next year, beyond Mr Walsh saying that a profit should be on the horizon.

The trade lobby revised its estimate for the industry’s performance this year to a smaller loss after a bumper summer combined with limited capacity helped to push up yields — a measure of fares — by 8.4%.

The sector’s loss for 2022 is now expected to be about $6.9bn, compared with a $9.7bn shortfall estimated in June and one of $11.6bn predicted the previous October.

At the same time, passenger numbers have reached only 70% of pre-pandemic levels as a result of China’s clampdown, well short of prior estimates, and may reach only 85% over the course of next year, said IATA.

Walsh said airlines continue to benefit from pent-up demand as people take their first holidays in years and catch up with friends and family.

“I’m optimistic going into 2023,” he said. “The headwinds we foresee are significant, but they are business-as-usual headwinds,” he said.

IATA chief economist Marie Owens-Thomsen also said she is confident that sales will continue to be buoyed by record-high global employment despite high inflation and rising interest rates. Bookings and fares may become more vulnerable if and when unemployment starts to increase, she said.

Passenger numbers should recover to 2019 levels in 2024, she said.

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