According to the International Air Transport Association (IATA), the airline industry is set to fly approximately 4.35 billion passengers this year. Nearing the record numbers of 2019, as it rebounds from the impact of the Covid-19 pandemic. In addition, the sector is expected to return to profitability. With projected net profits of $9.8 billion in 2023, doubling previous estimates. The lifting of Covid restrictions in China has contributed to this positive outlook.
IATA revealed that the industry’s losses in 2022 were half as severe as initially anticipated, totalling $3.6 billion. IATA director general Willie Walsh expressed his satisfaction with the financial performance. Stating that airline profitability in 2023 has exceeded expectations. One factor supporting this improved outlook is China’s earlier-than-expected relaxation of Covid-19 restrictions. Despite the continued high jet fuel prices, there has been some moderation in the first half of the year. Furthermore, the decrease in oil and natural gas prices since Russia’s invasion of Ukraine in February 2022 has provided cost relief for the industry.
Even after the pandemic, the desire to travel remains strong
Despite global economic uncertainties, the desire to travel remains strong, even as ticket prices have had to absorb elevated fuel costs, according to Walsh. The airline industry was severely impacted by the pandemic. Suffering losses of $137 billion in 2020 due to lockdowns and border closures imposed by various countries. In 2021, it incurred further losses of $42 billion, and it remained in the red until China lifted its Covid restrictions in December of that year.
However, worries on margins continue to remain a concern for companies. Profit margins, clocking in at 1.2%, were still too thin to ensure the industry’s long-term financial robustness, Walsh said.
He said that demand is being lifted by high employment levels even with a weaker macroeconomic outlook.
“A lot of people not just have to travel, but want to travel. And they will continue to do so through this year,” Walsh told Reuters in an interview separately. “That tends to give consumers confidence that they can spend money, that they can incur some debt to continue to enjoy what it is they’re doing.”