Despite continued concerns about pandemic-related financial losses, rising inflation and cost pressures, the global airline industry is expected to finally return to profitability in 2023, according to the International Air Transport Association (IATA).
Although airline operators faced several challenges, including rising operating costs, labor shortages, strikes and other disruptions in the world's key hubs in 2022, they still managed to reduce losses thanks to a increased travel demands.
Recent IATA analysis suggests passengers are taking advantage of relaxed travel restrictions. IATA found that 70% of passengers in 11 global markets are traveling as much or more than they did before the pandemic.
Analysts say the global airline industry is expected to end 2022 on a positive note. IATA estimates the airline industry's net loss to be around $6,9 billion at the end of 2022, compared to $42 billion and $137,7 billion in 2021 and 2020, respectively.
The industry is expected to see around 8,4% growth in passenger traffic at the end of 2022 compared to 2021, leading to a significant jump in passenger revenue to $438 billion from $239 billion of dollars in 2021. According to IATA Director General Willie Walsh, airlines will end the year at around 70% of 2019 passenger volume.
Industry experts believe that the cargo market has played a key role for airlines to cut losses in 2022. IATA estimates that cargo-related revenues will almost double to a total of $201,4 billion, compared to $100,8 billion in 2019. And so, total revenue is expected to grow by 43,6% over 2021, reaching an estimated $727 billion by the end of 2022.
In 2023, airlines will post their first profits since 2019. Air carriers are expected to post a net profit of around $4,7 billion in 2023.
“As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. This is a great achievement given the extent of the financial and economic damage caused by the pandemic restrictions imposed by governments. But a profit of $4,7 billion on industry revenue of $779 billion also illustrates that there is much more ground to cover to put the global industry on a sound financial footing,” according to the IATA director general.
"This improvement in performance indicators comes despite growing economic uncertainties as global GDP growth slows to 1,3% (from 2,9% in 2022)," IATA explains in its report.
For passenger flights, demand is expected to reach about 85,5% of 2019 levels, generating revenues of 522 billion in 2023. But this estimate takes into account continued uncertainty with China's zero-COVID policy, which continues to constrain the recovery of domestic and international markets.
“However, passenger numbers are expected to break the four billion mark for the first time since 2019, with 4,2 billion travelers expected to fly next year. However, passenger yields are expected to decline (-1,7%) as additional costs will be passed on to consumers, despite increased passenger demand (+21,1%) rather than capacity (+18,0 .XNUMX%),” the report suggests.
While the outlook for passenger services is largely positive, the global air cargo market could, according to IATA, shrink in 2023, with revenues expected to reach $149,4 billion, about $52 billion more little more than in 2022.
However, such a performance would still be about $48,6 billion stronger than the airlines' performance in 2019.
Given the current economic instability, cargo volumes could fall to 57,7 million tons, compared to 65,6 million tons flown by cargo operators in 2021.
In conclusion IATA believes that aviation is on an upward slope. Passenger travel demand increases, but cargo area will decrease. Despite all the positive estimates, aviation will still be below the peak level reached in 2019. But even in these conditions of economic instability, the global aviation industry is expected to make a small profit of only $4.7 billion.