Despite significant economic uncertainties and geopolitical tensions, International Air Transport Association (IATA) projections show that airlines will generate $9.8 billion in net earnings this year, a financial performance that IATA director general Willie Walsh described as “beating expectations.” In December, the IATA projected a global industry net profit of $4.7 billion. The association contributes the higher profitability projection to China lifting its stringent Covid-19 restrictions earlier in the year than anticipated, strong cargo revenues, and, on the cost side, a moderation of jet fuel prices. “Airlines are en route to a profitable, safe, efficient, and sustainable future," Walsh said Monday at the IATA annual general meeting in Istanbul. "The pandemic years are behind us.”
The net profit equates to $2.25 per passenger. “So, the value retained by airlines for the average plane trip won’t even buy a subway ticket in NYC," Walsh noted. "Clearly, that level of profitability is not sustainable. [But] considering we lost $76 per passenger in 2020, the velocity of the recovery is strong.”
The industry’s “amazing” turnaround in 2023—only three years after the historic net loss of $137.7 billion in 2020 and accumulated $183.3 billion of net losses for 2020-2022—speaks to its potency, according to Marie Owens Thomsen, IATA senior vice president for sustainability and chief economist. “It shows how magnificently resilient the industry is, being able to bounce back so rapidly from a near total halt."
However, a net margin of 1.2 percent also demonstrates “that robustness could be improved, in the interest of stronger balance sheets and safer profit margins,” Owens Thomsen told reporters during the presentation of the updated industry outlook. Industry profitability remains fragile, she said, cautioning that airlines’ performance and the IATA outlook could still reflect the effects of economic and geopolitical events. “We fear more downside than upside challenges,” she conceded. Downside risks include the possibility of a recession, an escalation of the Russia-Ukraine war, and the widening of broader geopolitical tensions. Meanwhile, the continuation of supply-chain issues and regulatory cost burdens present downside risks as well.
Financial performance across regions remains divergent and continues to be led by North America, where IATA expects operators to generate $11.5 billion in net profits. The association also expects Europe and the Middle East to turn handsome profits this year—$5.1 billion and $2 billion, respectively—while Asia Pacific, Latin America, and Africa continue to record losses.
IATA expects that some 4.35 billion people will travel in 2023, compared with the 4.54 billion who flew in 2019. Measured in revenue passenger kilometers (RPKs), full-year global traffic will likely reach 87.8 percent of 2019 levels and fully recover to the 2019 mark in 2024. “We do remain impaired, though, and it might take years before we catch up with the pre-Covid trend in traffic,” Owens Thomsen concluded.