Global airline industry more than doubles its profit forecast

The global airline industry has more than doubled its profit forecast for this year, with the sector’s trade body predicting net profits will rise to $9.8bn on the back of a travel boom that has lifted carriers’ recent results.

The sector has benefited from a resurgence in post-pandemic demand which has boosted both passenger numbers as well as freight at a time when fleet growth has been constrained by production difficulties at Boeing and Airbus.

The forecast from the International Air Transport Association compares with net losses for the industry of $3.6bn in 2022 and the trade association’s forecast in December of $4.7bn in net profits for this year. Iata projected revenues for 2023 to rise 9.7 per cent to $803bn, topping the $800bn mark for the first time since the pandemic forced carriers to slash capacity, leading to industry-wide losses.

The organisation gave a particularly strong forecast for North American airlines, predicting that revenue passenger kilometres (RPKs) in the region would be 2 per cent above the levels in 2019. RPKs measure the number of passengers carried multiplied by the distance each was carried. Worldwide, Iata predicted RPKs would reach 87.8 per cent of the 2019 level.

Willie Walsh, Iata’s director-general, said that airline financial performance for the year was beating expectations, with stronger profitability supported by “several positive developments”.

“China lifted Covid-19 restrictions earlier in the year than anticipated,” said Walsh, adding that cargo revenues remained above pre-pandemic levels although volumes had not.

The improved profit outlook partly reflects Iata’s projection that costs will rise 8.1 per cent compared with 2022, more slowly than projected revenues.

“On the cost side, there is some relief,” added Walsh. “Jet fuel prices, although still high, have moderated over the first half of the year.”

Leisure travel has rebounded far faster for most airlines than the business market, traditionally a strong driver of industry profits.

Iata predicted passenger revenues for the industry in 2023 would be $546bn, 27 per cent up on 2022 levels but still 10 per cent below the level reached in 2019.

The group forecast cargo revenues for the sector of $142bn. That figure is below the $210bn in 2021 and $207bn in 2022. In both those years, cargo yields were pushed up by a combination of shortage of capacity in the holds of aircraft on passenger flights and strong demand to move consumer goods. The projected figure is still, however, well above the $100bn achieved in 2019.

Walsh said there were many good reasons for optimism.

“Achieving profitability at an industry level after the depths of the Covid-19 crisis opens up much potential for airlines to reward investors, fund sustainability and invest in efficiencies to connect the world even more effectively,” he said.