IATA Looks to the Future with Great Hopes

The International Air Transport Association (IATA) announced an expected strengthening of the airline industry's profitability in an improved outlook for 2023.

Airline industry net profits are expected to reach $9.8 billion in 2023 (1.2% net profit margin), more than double the previous forecast of $4.7 billion (December 2022).

The airline industry's operating profit is expected to reach $22.4 billion in 2023, well above the December forecast of an operating profit of $3.2 billion. It's also more than double the estimated $10.1 billion operating profit for 2022.

Some 4.35 billion people are expected to travel in 2023, which is close to the 4.54 billion who flew in 2019.

Cargo volumes are expected to be 57.8 million tons, which has fallen below the 61.5 million tons transported in 2019 with a sharp slowdown in international trade volumes.

Total revenue is expected to grow 9.7% year-over-year to $803 billion. This marks the first time the industry's revenue has surpassed the $800 billion mark since 2019 ($838 billion). Spending growth is expected to be contained to an annual increase of 8.1%.

“The financial performance of airlines in 2023 is exceeding expectations. The higher performance is supported by several positive developments. China lifted COVID-19 restrictions ahead of schedule in the year. Cargo revenue remains above pre-pandemic levels, though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, while still high, have moderated over the first half of the year,” said Willie Walsh, IATA Director General.

The return to net profitability, even with a net profit margin of 1.2%, is a significant achievement. First, it was achieved at a time of significant economic uncertainties. And second, it follows the deepest losses in aviation history ($183.3 billion net loss for 2020-2022 (inclusive) for an average net profit margin of -11.3% over that period). It should be noted that the airline industry entered the COVID-19 crisis at the end of a historic winning streak that saw an average net profit margin of 4.2% for the 2015-2019 period.

“Economic uncertainties have not dampened the desire to travel, even as ticket prices have absorbed soaring fuel costs. After deep losses from COVID-19, even a 1.2% net profit margin is something to celebrate! But with airlines only earning $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines," Walsh said.