BUSINESS

Airlines to return to profit in 2023 with small global net profit of US$4.7 bln - IATA

07/12/2022 09:38 PM

From : Nurul Jannah Kamaruddin

GENEVA, Dec 6 (Bernama) -- Global airlines are expected to post its first profitability since the pandemic next year with a net profit of US$4.7 billion as carriers continue to recover and cut losses despite growing economic uncertainties, the International Air Transport Association (IATA) projected.

Global airlines will post their first profits next year as carriers continue to recover and cut losses due to the COVID-19 pandemic despite growing economic uncertainties, the International Air Transport Association (IATA) said.

IATA projected in a statement that global carriers would achieve a net profit of US$4.7 billion, a 0.6 per cent net profit margin, mainly contributed by North American carriers, which have been seen realising their profits in 2022. 

The transport association said airlines’ net losses are expected to be lower for 2022, amounting to an estimated US$6.9 billion, an improvement from US$9.7 billion projected in its June’s outlook and significantly improved from losses of US$42 billion and US$137.7 billion in 2021 and 2022 respectively.

“But a US$4.7 billion profit on industry revenues of US$779 billion also illustrates that there is much more ground to cover to put the global industry on a solid financial footing,” IATA director-general Willie Walsh said during the two-day IATA Media Global Day here.

Walsh said while there are airlines sufficiently profitable to attract the capital needed to drive the industry forward, many are still struggling for many reasons, such as high costs and inefficient infrastructure.

IATA said European and Middle East carriers are expected to join North American airlines returning to profitability in 2023.

It said North America is expected to generate profits of US$9.9 billion in 2022 and US$11.4 billion next year on the back passenger demand growth of 6.4 per cent, which would outpace capacity growth of 5.5 per cent. 

“Overall, the region is expected to serve 97.2 per cent of pre-crisis demand levels with 98.9 per cent of pre-crisis capacity in 2023,” it said.

IATA said European airliners would record a US$3.1 billion loss this year and a profit of US$621 million in 2023, while the Middle East is forecast to post a loss of US$1.1 billion in 2022 and a profit of US$268 million in 2023.

“Nevertheless, Asia Pacific, Latin America, and Africa’s financial performance will continue to be in contraction in 2023,” it said.

 

Held back by China’s Covid-19 policy

 

IATA opined that Asia Pacific growth would be held back by China’s COVID-19 zero policy on travel, with the region’s losses slowing to US$6.6 billion in 2023 from US$10 billion in 2022.

“Taking a conservative view of progressive easing restrictions in China over the second half of 2023, we nevertheless expect a strong pent-up demand to fuel a quick rebound in the wake of any such moves,” Walsh said.

Both Latin American and African carriers are estimated to register a loss of US$2 billion as well as US$638 million in 2022 respectively, and losses are expected to narrow to US$795 million and US$213 million in 2023 respectively.

“The challenges that airlines would face in 2023, while complex, will fall into our areas of experience. The industry has built a great capability to adjust to fluctuations in the economy, major cost items like fuel prices and passenger preferences.

“We see this demonstrated in the decade of strengthening profitability following the 2008 Global Financial Crisis and ending with the pandemic,” Walsh said.

He said there was evidence that travellers are confident to travel even with an uncertain economic outlook, and passenger numbers are likely to return to pre-pandemic level in 2024.

“Passenger volumes are anticipated to end 2022 at 70 per cent of 2019’s numbers,” he said.

Walsh said the passenger business is projected to generate revenues of US$522 billion, with demand to reach 85.5 per cent of the 2019 level in 2023, taking into account the uncertainties of China’s COVID policy.

“Nevertheless, passenger numbers are expected to surpass the four billion mark for the first time since 2019 with 4.2 billion travellers,” he said.

On the other hand, Walsh said the cargo business was estimated to come under increased pressure in 2023, with revenues of US$149.4 billion, less by US$52 billion than in 2022. 

He said cargo volumes are expected to dip to 57.7 million tonnes from a peak of 65.6 million tonnes in 2021.

 

Risk of recession remains

 

IATA chief economist Marie Owens-Thomsen said while indicators point there could be an easing of aggressive interest rate hikes from early next year, the risk of recession in some economies remains. 

She said this could affect demand for both passenger and cargo, but there is likely some mitigation, thanks to lower oil prices.

IATA said total fuel spending is expected to be US$229 billion in 2023, based on a Brent crude price of US$92.30 per barrel, down from the average of US$103.20 per barrel in 2022.

“Jet kerosene is likely to average lower at US$111.90 per barrel, reflecting a relative stabilising of fuel supply after disruption from the war in Ukraine,” it added.

“The premium charged for jet fuel (crack spread) remains near historical highs,” it added.

-- BERNAMA

 

 


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