In a significant boost to the aviation industry, the International Air Transport Association (IATA) has doubled the global airline profit projection for 2023.
Despite a looming economic downturn, airlines are expected to make $9.8 billion in net profit in 2023, up from a DEC forecast of $4.7 billion. This surge in profitability is attributed to factors such as increased cargo revenues, the reopening of China and lower jet fuel prices.
In addition, approximately 4.35 billion people are expected to travel in 2023, closing in on the 4.54 billion who flew in 2019.
“Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments. China lifted COVID-19 restrictions earlier in the year than anticipated. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, although still high, have moderated over the first half of the year,” said Willie Walsh, IATA’s Director General, in a release.
This remarkable turnaround is welcome news for the industry following a tumultuous period. Overall, the aviation industry suffered net losses of $183 billion between 2020 and 2022 as lockdowns impacted travel, according to CNN Travel.
While the outlook is positive, according to IATA, profit margins remain slim. Walsh highlighted that airlines would make $9.8 billion in profit based on revenues of $803 billion — in other words, a 1.2% net profit margin, netting just $2.25 per passenger.
Still, that’s cause for celebration, he said.
“Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep COVID-19 losses, even a net profit margin of 1.2% is something to celebrate! But with airlines just making $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines,” said Walsh.
