DALLAS — It is no secret that the past two years have been detrimental to the airline industry. A global pandemic, war, high fuel prices, and new airport fees have plagued a once-profitable air transport industry.
The International Air Transport Association (IATA), on the other hand, has stated that it is optimistic about a continued recovery in 2023.
IATA forecasted that in 2023, airlines are expected to move back into profitability. They estimate a global net margin of US$4.7bn, with total revenues topping US$779bn. This significant improvement is the first time the airline industry will be profitable since 2019.
Closing out 2022, the global airline industry is only expected to net a loss of US$6.9bn.
The passenger sector is expected to be the largest revenue driver for the 2023 fiscal year. IATA expects over 4 billion travelers, which will be the first time global travelers will surpass the 4 billion mark since 2019. This outcome is just over 85% of the passenger numbers of 2019, showing a positive sign of recovery.
Another strong indication of the industry recovery is the passenger demand growing over capacity. The passenger demand has increased to just over 21% over 2021, with capacity growing to just 18%. With demand greater than capacity, airlines have the opportunity to grow even more.
Cargo also plays a key role in the global air transport economy. Revenues are expected to top just over US$149bn in 2023. Even though this is a decrease from 2022, it is still US$48.6bn greater than the pre-pandemic, 2019 revenue. The air cargo market was one of the only air transport sectors to see growth during the COVID-19 pandemic.
A key economic driver for the airline industry is the predicted lowering of fuel prices. Jet kerosene is expected to drop over US$26 per barrel, from US$138.8 to US$111.9. This expected drop reflects the proposed stabilization after the initial fuel price increase due to the war in Ukraine.
The Asia-Pacific region is expected to see the greatest loss when it comes to net profit. A US$6.6bn loss is expected to shake the region in 2023. IATA cites the Chinese “Zero COVID” policies as the main reason that the region will see the greatest economic penalty.
However, the North American region is expected to see the greatest profit for 2023. This region is also expected to see the quickest return to pre-pandemic levels. A profit of US$11.4 billion is expected for the 2023 fiscal year, while passenger demand levels are expected to return to 97.2% of pre-pandemic levels. Shorter and fewer restrictions are the main reasons IATA cited for the economic gain of the region.
Europe is also expected to see an overall net profit in 2023. IATA is citing the resolving of operational disruptions at some select hubs as a reason for the US$621m net profit. However, the war in Ukraine as well as labor disputes have stunned the growth according to IATA.
The Middle East region is the only other region that is expected to see a profit in 2023. The region has a very extensive global network of flights connecting every corner of the world. IATA says that this factor is a key driver for the region’s expected US$268m profit.
Pre-pandemic passenger demand levels are also expected to grow to 95.6% in 2023.
The global economy as a whole is a key indicator of the economic status of the African air transportation region, according to IATA. Due to this, the region is expected to experience a net loss of US$213 million over 2023. However, passenger demand is expected to grow to 86.3% of pre-pandemic demand.
Despite the lifting of COVID-19 restrictions, the Latin American region is predicted to show a net loss of US$795m for the next year. The region is also expected to see low demand growth of just 9.3%.
Featured Image: Adrian Nowakowski/Airways