Airlines set to make first profit since 2019 next year

Global airlines are expected to return to profit for the first time since 2019 next year as the industry recovers from the impact of the Covid pandemic and travel demand remains strong despite a weakening economy. ‘economy.

The International Air Transport Association, an industry body, said on Tuesday it expects airlines to report net profit of $4.7 billion in 2023, after racking up more than 185 billions of dollars in losses over the previous three years of limited flights due to government travel restrictions.

Willie Walsh, chief executive of Iata and former boss of British Airways, said the economic recovery highlighted the “resilience” of the airline industry.

“The expected profits for 2023 are extremely slim. But it is extremely significant that we have passed the threshold of profitability. . . the industry has a great ability to adapt to fluctuations in the economy,” he said.

Passengers flocked to the skies as border restrictions eased in most countries this year, and demand is expected to reach 85.5% of 2019 levels in 2023, from 70% this year.

Still, Walsh warned there was still a “much further to go” to put the industry “on a solid financial footing”.

Willie Walsh, Director General of Iata
Iata’s Willie Walsh says many airlines are still struggling with high costs, including fuel, “onerous” regulations and inefficient infrastructure © Tadayuki Yoshikawa/Aviation Wire via Reuters

With the industry’s profitability historically dependent on a handful of North American and European carriers, Walsh said many other airlines were still “struggling” with high costs, including fuel, “onerous” regulations and infrastructure. ineffective.

Airlines in Africa, Latin America and Asia-Pacific are expected to post losses in 2023, and Iata said China’s zero Covid policies had “critically held back” the resumption of air travel across Asia.

Globally, airlines are expected to post a profit of $4.7 billion on $779 billion in revenue, a net profit margin of just 0.6%, down from 3.1% in 2019.

“With such thin margins, even an insignificant change. . . has the potential to tip the balance into negative territory,” Walsh said.

Line chart of the MSCI World Airlines Index showing airline stocks have struggled to recover from the pandemic

The biggest question facing the industry is whether travel demand can stay strong as consumers tighten their belts amid the cost of living crisis in many parts of the world.

So far, no major airline has reported a significant slowdown in sales.

Johan Lundgren, chief executive of British low-cost carrier easyJet, said last week that there was “some uncertainty” about people’s appetite to travel, particularly for the summer season next year. .

But demand had “remained strong”, he added, for peak periods including the recent half of October, Christmas, New Year and Easter.

Airline stock prices rose sharply as investors welcomed these signs of demand resistance.

The MSCI World Airlines Index is up 23% since the start of October, but is still a third below its pre-pandemic level.

Leave a Reply

Your email address will not be published. Required fields are marked *