IATA sees positive prospects for airline industry despite uncertainty

Alexandre de Juniac, the IATA Director General said fresh outbreaks of Covid-19 and governments’ continued reliance on heavy-handed quarantines resulted in another catastrophic month for air travel demand.
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Michael Wakabi The global airline industry is expected to sustain gains with all regions projected to […]

Michael Wakabi

The global airline industry is expected to sustain gains with all regions projected to see improved finances for 2022, and beyond, on the back of easing pandemic restrictions and moderating oil prices. And despite “significant headwinds,” that saw global economic growth slowdown from 6 to 3pc this year, IATA chief executive Willie Walsh, sees growth trends as largely in line with long-term averages.

Speaking during the IATA Global Media Days which opened in Geneva today, Walsh said North America was leading the recovery and would likely post a profit this year. Europe and the Middle East will follow next year while Latin America, Africa and Asia Pacific will come much later in 2024 and beyond.

Profits are projected at USD 4.7billion in 2023 (0.6pc net profit margin) against revenues of USD 779 billion.

“Resilience has been the hallmark for airlines in the Covid-19 crisis. As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. Tat is a great achievement considering the scale of the financial and economic damage caused by government imposed pandemic restrictions. But a USD 4.7billion profit on industry revenues of USD 779 billion also illustrates that there’s much more ground to cover to put the global industry on a solid footing,” Walsh said.

The industry’s progress is reflected in the narrowing loss, projected at USD7billion this year, a huge gain compared to the USD138bn loss incurred in 2020 and USD42 billion in 2021. This year’s loss is lower than IATA’s outlook of USD9.7billion for the year.

The positive prospects for 2022 are attributed to stronger yields and tight cost control against a backdrop of rising fuel prices. Passenger yields are projected at 8.4pc for the year, revenues projected at USD 438billion. Air cargo revenues are expected to hit USD 201 billion, doubling the USD 100.8 billion earned in 2019.

Headwinds ahead

But the global economy and geopolitical situation represent significant downsides which could impact performance during 2023. There’s a risk of some economies sliding into recession while a failure by China to ease Covid-19 restrictions would dampen prospects.

“The job of airline managements will remain challenging as careful watch on economic uncertainties will be critical,” says Walsh.

“The good news is that airlines have built flexibility in their business models to be able to handle the economic accelerations and decelerations impacting demand.”

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