ISTANBUL – Airlines are expected to reap net profits totalling US$9.8 billion (S$13.2 billion) this year, more than double the previous forecast of US$4.7 billion made last December.
The International Air Transport Association (Iata) on Monday also said the number of passengers travelling by plane in 2023 is projected to reach 95.8 per cent of pre-Covid-19 levels, as the aviation industry continues to rebound from the pandemic.
Around 4.35 billion people are expected to fly this year, compared with the 4.54 billion who flew in 2019.
At its annual general meeting in Istanbul, Turkey, the industry body forecast that airlines would fare better in 2023 across the major financial indicators.
Revenue is expected to reach US$803 billion, an increase of 9.7 per cent over 2022. This would be the first time that industry revenue exceeds US$800 billion since 2019, when airlines earned US$838 billion. Expenses will grow by 8.1 per cent over 2022, Iata added.
Net profit margin, which measures how much net income or profit is generated as a percentage of revenue, is set to reach 1.2 per cent. This is a reversal of what was seen between 2020 and 2022, when the industry saw a net loss of US$183.3 billion to yield an average net profit margin of minus 11.3 per cent.
Before the pandemic, the industry had an average net profit margin of 4.2 per cent from 2015 to 2019.
Iata represents 300 airlines in more than 120 countries, carrying 83 per cent of global air traffic.
The industry body said carriers in the Middle East, North America and Europe are projected to earn higher profits than what they managed in 2022, while those in Latin America and Africa will pare down their losses.
Airlines in Asia-Pacific are forecast to make a net loss of US$6.9 billion overall in 2023, an improvement from the net loss of US$13.5 billion in 2022.
With all Covid-19-related travel restrictions lifted in the region, Iata expects both passenger volumes and capacity to rise sharply, which would narrow the gap in net profitability with the other regions.
Iata director-general Willie Walsh attributed the better-than-expected financial performance of the industry to China lifting its Covid-19 restrictions earlier in the year than anticipated, as well as how revenue from cargo stayed above pre-pandemic levels even though volumes have not recovered.
He also noted that the cost of jet fuel, while still high, has moderated over the first half of the year.
Mr Walsh, who took on the role at the industry body in April 2021, said that airlines will make on average US$2.25 per passenger in 2023.
“Clearly, that level of profitability is not sustainable. But considering we lost US$76 per passenger in 2020, the velocity of the recovery is strong,” he said.
He added that challenges remain, citing inflation, cost pressures and a shortage of labour in some areas.
On sustainability, Mr Walsh noted that Iata has published a series of road maps to chart how the industry can reach net-zero carbon emissions by 2050.
“These road maps are the first detailed assessment of the key steps necessary to make net zero by 2050 an aviation success – covering technology, infrastructure, operations, finance and policy,” he said.
He added that sustainable aviation fuels will be the biggest contributor to reaching the net-zero target.
Today, the production of such fuel is less than 0.1 per cent of what is needed for net zero, he said. But he added that the trend is positive, with sustainable aviation fuel production tripling to 300 million litres in 2022.
“With the right supportive policies, reaching 30 billion litres by 2030 is challenging but achievable,” Mr Walsh said, noting that would be about 6 per cent of the 450 billion litres annual production capacity needed in 2050.
Airlines are willing to use such fuel, but there is insufficient production capacity to meet demand, he said, calling on governments to do more to help boost production.
