Global airline profit to reach $9.8bn in 2023: IATA

The global aviation industry’s profit is expected to reach $9.8bn in 2023, more than double the $4.7bn forecast in December, driven by pent-up demand for air travel as the industry recovers from the impact of the Covid-19 pandemic.

The International Air Transport Association (IATA) said the return to net profitability, even with a 1.2 per cent net profit margin, is a major achievement for the industry.

The airline trade body projected that the industry’s operating profits will reach $22.4bn this year, more than the December forecast of $3.2bn. The operating profit is also more than double the $10.1bn operating profit estimated for 2022.

IATA expects some 4.35 billion passengers to travel in 2023, around 96 per cent of 2019 levels.

“Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments,” Willie Walsh, IATA’s director general said, adding that cargo revenues remain above pre-pandemic levels even though volumes have not.

“Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep Covid-19 losses, even a net profit margin of 1.2 per cent is something to celebrate!”

Air industry profitability is expected to strengthen in 2023 ?.

The return to net profitability is a major achievement, but with #airlines just making $2.25 per passenger on average, it will continue to be a challenging environment for many ✈️.https://t.co/86Guc7xMOE#IATAAGM pic.twitter.com/LH6Pv8abm0

— IATA (@IATA) June 5, 2023

The revenue levels for the industry are also inching closer to pre-pandemic levels, with a 9.7 per cent year-on-year (YoY) increase to $803bn – the first time that global airlines’ revenues topped the $800bn mark since 2019 ($838bn).

IATA expects expense growth to be contained to an 8.1 per cent annual increase in 2023 while an inventory of 34.4 million flights is expected to be available, a 24.4 per cent YoY increase compared to 2022.

Similarly, passenger revenues are expected to surge by 27 per cent to $546bn and the industry is expected to reach 87.8 per cent of 2019 levels of revenue passenger kilometres (RPKs) in 2023 following the lifting of pandemic-related restrictions in all major markets.

Middle East profitability

Middle Eastern airlines have in recent months reported strong results as they prepare for a busy summer season, with travel demand showing no sign of flagging despite peaking inflation.

UAE’s Emirates Group reported record profit and revenue figures for the year ending April 2023, supported by a surge in travel demand as the majority of pandemic-induced travel restrictions were lifted. The group’s annual profit reached $3bn (Dhs10.9bn) while its revenue soared by 81 per cent to Dhs119.8bn.

Similarly, flydubai reported a full-year profit of Dhs1.2bn in 2022. The budget carrier’s annual revenues jumped 72 per cent to Dhs9.1bn from Dhs5.3bn a year earlier.

IATA said Middle Eastern carriers’ return to profitability last year was supported by a significant increase in the passenger load factor of almost 25 percentage points, outstripping the performance of the other regions.

The region’s airlines have been swiftly rebuilding their international networks and international connectivity returned to 98 per cent of its pre-pandemic levels in March 2023.

Read: Emirates Group reports highest-ever annual profit of Dhs10.9bn for FY2022/23

IATA sees challenge

Meanwhile, IATA said the current economic and geopolitical environment presents several risks to the outlook.

“With just $22.4bn of operating profit (2.8 per cent) standing between $803bn of revenues and $781bn in expenses, industry profitability is fragile and could be affected (positively or negatively) by several factors,” IATA said in a statement on Monday.

The inflationary pressures, supply chain challenges, geopolitical tensions and regulatory cost burdens are dragging down the industry’s recovery.

Airline executives from the industry’s 300 airlines represented by IATA met in Istanbul over the weekend for the trade body’s 79^th annual general meeting.