Aviation industry expected to make $13.5b net loss this year, turn profits next year: Iata

By year-end, passenger numbers should reach 83 per cent of levels seen before the Covid-19 pandemic. ST PHOTO: KUA CHEE SIONG

DOHA - The aviation industry is expected to make a net loss of only 1.2 per cent in revenue this year, and should turn a profit as early as next year as air travel continues to rebound more strongly than previously expected.

This amounts to a net loss of US$9.7 billion (S$13.5 billion), down from US$42.1 billion in 2021 and US$137.7 billion in 2020, International Air Transport Association (Iata) director-general Willie Walsh said on Monday (June 20).

By the end of the year, passenger numbers should reach 83 per cent of levels seen before the Covid-19 pandemic.

In particular, airlines in North America, as the strongest-performing region, will even be out of the red by the end of this year despite continued risk factors such as the war in Ukraine and higher inflation and interest rates, he added.

"People who longed for the freedom to fly are taking to the skies again - and in growing numbers. By next year, most markets should see traffic reach or exceed pre-pandemic levels," Mr Walsh said.

He was speaking during Iata's annual general meeting in Doha on Monday, where he gave an improved forecast of the sector's recovery.

His report was a much anticipated keynote for the beleaguered sector, with Iata representing 290 airlines and comprising 83 per cent of global air traffic.

In October, before the war in Ukraine broke out, Iata had said airlines would lose US$11.6 billion this year. The new figure shaves this by US$1.9 billion despite arguably more challenging circumstances, with a war and fuel prices - airlines' single largest source of expenditure - expected to increase by 50 per cent this year.

The new outlook takes these, as well as continued issues of labour shortages, into account, Mr Walsh said, replying to journalists' questions.

He said the improved prognosis "reflects not just the very strong demand we are seeing at the moment, but the expected demand development", as well as a global gross domestic product growth of 3.4 per cent this year.

"When you look at the average growth that we would have witnessed in the 10 years between 2010 and 2019, it would have been less than (3.4 per cent) on average," he said. "Prior to the crisis, the industry's financial foundations were at their strongest point ever."

But Iata's forecast continues to be regionally varied.

China's continued closure and the slower opening up of border restrictions in the Asia-Pacific means passenger traffic in the region continues to languish at about 22 per cent of pre-Covid-19 levels.

However, Mr Philip Goh, Iata's regional vice-president for Asia-Pacific, said at a press briefing on Sunday that the region "should see a very good second half of the year", with a huge uptick in recent months as most countries removed pre-departure and on-arrival tests.

Passenger numbers should increase to 73.7 per cent of 2019 levels by the end of the year and the number of seats to 81.5 per cent of what it was before.

Mr Goh called on governments to remove testing requirements and quarantine even for the unvaccinated, as long as they are from countries with high herd immunity.

Mask mandates for passengers in airplanes should also be removed, he said, since air in the cabin is refreshed every two to three minutes, much more frequently than for most indoor settings.

Asked when China might relax its border restrictions, Mr Goh said the industry is hoping for changes after October, when the Communist Party's National Congress is held.

Issues facing the aviation sector in other regions include manpower shortages that have been affecting especially the United States and Europe, and high tourism taxes and airport charges in South America.

In Africa, there is the particular problem of blocked funds, where governments have held hostage US$1.4 billion in foreign currency. This is impacting African airlines' profit margins and has, in turn, caused them to raise airfares.

Iata's vice-president for Africa and the Middle East, Mr Kamil Al Awadhi, singled out Nigeria, where US$450 million in blocked funds is causing airlines to raise fares to six to seven times higher than they are for other destinations.

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