Again optimistic after two and a half years of Covid-19, airlines expect to cut losses this year and return to the green in 2023, on the back of a strong recovery in passenger demand.
Again optimistic after two and a half years of Covid-19, airlines expect to cut losses this year and return to the green in 2023, on the back of a strong recovery in passenger demand. The sector is still expected to lose a cumulative $9.7 billion this year, but it will be a “huge improvement” after the $137.7 billion lost in 2020 and the $42.1 billion in 2021, the Association pointed out. Air Transport Association (Iata), which brings together the vast majority of airlines worldwide and holds its annual general meeting in Doha.
“Industry-level profitability in 2023 looks within reach, as (airlines) in North America are expected to make $8.8 billion in profits by 2022,” Iata said in a statement. In addition, “strong pent-up demand, the lifting of movement restrictions in most markets, low unemployment in most countries and personal savings are fueling a recovery that will result in passenger numbers reaching 83% of the level before the pandemic” this year, assured the organization.
Iata still sees attendance return to pre-crisis figures in 2024. The health crisis, the effects of which were felt from March 2020, torpedoed the airline sector, which lost 60% of its customers this that year. In 2021, attendance had only risen to 50% of the 4.5 billion passengers in 2019. In terms of turnover, the companies expect to return to 93.3% of 2019 levels in 2022. At 782 billion dollars, it will be a jump of 54.5% over one year. This increase will be fueled by revenue from passenger transport, which will “more than double” over one year to 498 billion dollars, while freight revenue will fall slightly to 191 billion dollars against 204 billion the previous year, but still at a “double level” of 2019. Freight was one of the few oxygen balloons in the aviation sector during the crisis.
“Risk factors”
Across the aviation landscape, “optimism is in order, although there are still cost challenges, particularly jet fuel, and continued restrictions in some key markets,” noted the chief executive. of Iata, Willie Walsh, quoted in the text. Indeed, the invasion of Ukraine by Russia and the sanctions against Moscow have pushed the price of hydrocarbons to new heights. Fuel will represent some 24% of airline costs in 2022, compared to 19% in 2021, according to Iata.
The organization has identified several “risk factors” that could alter its forecasts, first and foremost the war in Ukraine. The closure of Russian airspace to many carriers forces them to make costly detours on routes between Asia and Europe or the United States. Another operational challenge, the labor problems which result in a shortage of pilots in the United States, handlers and security guards in certain European airports, a phenomenon that Iata expects to see reduced in the coming months. . Another cloud on the horizon is high inflation which is eroding consumers’ purchasing power, although airlines, which have already started to raise ticket prices, could benefit from an interest rate hike which would reduce the service of their large debts contracted at lower rates.
Weakened by the crisis, companies must currently both clean up their finances and invest massively to reduce their net CO2 emissions to zero by 2050, an objective recalled on Monday by Iata. And finally, if the Covid-19 is no longer the main concern, the pandemic continues and the emergence of new variants could again cause border closures, fears Iata, considering that it is not a question “not an effective means of controlling contamination”. China’s domestic market, which accounted for some 10% of global passenger traffic in 2019, is currently still affected by restrictions and Iata has warned that the “zero Covid” policy, if persisted, “will continue to depress the second market. global interior and wreak havoc on global logistics”.