GENEVA – Airlines are expected to return to profit in 2023 for the first time since 2019, before the Covid-19 pandemic caused havoc in the travel sector, an industry group said on Tuesday.
After cutting losses in 2022, airlines are expected to make US$4.7 billion (S$6.4 billion) in net profits in 2023, according to the International Air Transport Association (IATA).
This is still far off the US$26.4 billion profit the industry reported in 2019, before Covid-19 prompted countries to enact travel restrictions.
“Resilience has been the hallmark for airlines in the Covid-19 crisis,” IATA director-general Willie Walsh said in a statement.
“As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. That is a great achievement considering the scale of the financial and economic damage caused by government imposed pandemic restrictions,” the former British Airways boss said.
Airlines are expected to post US$779 billion in revenues in 2023.
Mr Walsh said many airlines are “sufficiently profitable” to attract capital as the industry seeks to decarbonise its operations.
But many others are struggling due to “onerous regulation, high costs, inconsistent government policies, inefficient infrastructure and a value chain where the rewards of connecting the world are not equitably distributed”, he said.
“It’s very important that everybody understands just how fragile the recovery is. Yes, we are recovering; yes, the momentum is improving; yes, we expect it to continue to improve in 2023,” said Mr Walsh.
“But the margins we are operating with are very small, and we cannot tolerate a situation where airports. in particular, attempt to gouge airlines and their passengers by significant increase in airport charges. Every single cent matters,” he added.
Passenger traffic was slightly lower than forecast in 2022 due to slowing economies and China’s zero-Covid restrictions.
But the IATA expects passenger traffic to return to 85.5 per cent of its pre-crisis level in 2023 and to pre-Covid levels by 2024, led by the United States and with the Asia-Pacific “notably lagging”.
IATA chief economist Marie Owens Thomsen warned that the risk to the latest forecasts on the sector remained “skewed to the downside” and the “key variable” would be China.
Beijing has begun easing draconian zero-Covid policies designed to stamp out transmission. It may announce 10 new easing measures as early as Wednesday, two sources with knowledge of the matter told Reuters on Monday, supplementing 20 unveiled in November. If China does not loosen restrictions, the airlines’ profitability would be affected.
Another risk for the 2023 outlook is that some economies will fall into recession.
Mr Walsh also hit out at jet manufacturers who are struggling to deliver aircraft and blaming their supply chains.
“It is causing a lot of frustration. It is adding to the cost base. When I speak privately to CEOs, it’s creating a lot of anger,” he said.
Mr Walsh said airlines have survived the worst of the downturns, though Europe’s fragmented market remained an area to watch.
“I think the challenge for some airlines still exists because, as we’ve seen, the industry is still only marginally profitable. In fact, in Europe, we can say we are break-even,” he said. “So, there’s clearly still financial pressure. The difference is airlines are generating cash now. Liquidity was the critical issue.” AFP, REUTERS
