Global airline industry profitability surges in 2023, with net profits expected to reach $9.8 billion this year, more than double the $4.7 billion forecast in December, according to the International Air Transport Association’s (IATA) projection on June 5.
Stronger profitability is attributed to factors such as increased cargo revenues, the reopening of China, and lower jet fuel prices, according to IATA’s Director General Willie Walsh.
Approximately 4.35 billion passengers are expected to travel by air in 2023, which is closing in on the 4.54 billion passengers who flew in 2019.
The figures mark a significant turnaround for the airline industry, which carried just 1.8 billion passengers in 2020 because of the COVID-19 pandemic, at a loss of $76 per traveler. Overall, the aviation industry suffered net losses of $183 billion between 2020 and 2022 as lockdowns hit travel.
Airline industry operating profits are expected to reach $22.4 billion in 2023, much improved over the December forecast of a $3.2 billion operating profit. It is also more than double the $10.1 billion operating profit estimated for 2022.
Total revenues are expected to grow 9.7 percent year-over-year to $803 billion. This is the first time that industry revenues will top the $800 billion mark since 2019 ($838 billion).
Air travel has rebounded even as high inflation and rising interest rates weigh on spending by businesses and consumers in other areas.
“Despite economic uncertainties, people are flying to reconnect, explore, and do business,” Walsh said during a speech at IATA’s annual meeting in Istanbul.
“Airports are busier, hotel occupancy is rising, local economies are reviving, and the airline industry has moved into profitability.”
However, profit margins remain “wafer thin,” Walsh added. “Repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines,” he said.
Walsh pointed out that airlines would make $9.8 billion in profit off $803 billion of revenue—netting just $2.25 per passenger.
The projections for a profitable commercial aviation sector follow the deepest losses in aviation’s history during the pandemic. The airline industry entered the COVID-19 crisis at the end of a historic profit streak that saw an average net profit margin of 4.2 percent for the 2015–2019 period.
In an interview with CNN, United Airlines CEO Scott Kirby said he expected the carrier to return to 2019 levels of profitability this year. The airline was holding a lot more cash on its balance sheet, however, to withstand a potential economic downturn in the near term.
“We’ve dramatically improved our relative and absolute profit margins, and we’re starting to pay down debt, and that gives us the firepower to really ride through a short term recession,” Kirby added.
Financial performance across regions remains diverse. IATA’s improved 2023 forecast is driven mainly by Europe, where IATA now expects a gain of $5.1 billion, having predicted a profit of $621 million in December.
Losses at Asian carriers, though, are expected to be $6.9 billion in 2023, almost half of 2022 estimates but worse than the $6.6 billion deficit IATA predicted at the end of last year. Asia was slower to open than much of the rest of the world, with China finally discarding the last of its COVID-19 measures in December.
“Resilience is the story of the day, and there are many good reasons for optimism,” Walsh noted.
CNN Wire contributed to this report.
