IATA

Mar 17, 2023

Translation:

国际航协：航空业盈利能力增强 2023 年行业净利润将达 98 亿美元 (pdf)

Havayolu Sektörünün Kârlılık Görünümü Güçleniyor (pdf)

Istanbul - The International Air Transport Association (IATA) announced an expected strengthening of airline industry profitability in an upgrade of its outlook for 2023. Highlights include:

"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.

The return to net profitability, even with a 1.2% net profit margin, is a major achievement. First, it was achieved at a time of significant economic uncertainties. And second, it follows the deepest losses in aviation's history ($183.3 billion of net losses for 2020-2022 (inclusive) for an average net profit margin of -11.3% over that period). It should be noted that 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% for the 2015-2019 period.

"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.

Revenues are rising (9.7%) faster than expenses (8.1%), strengthening profitability.

Revenue: Industry revenues are expected to reach $803 billion in 2023 (+9.7% on 2022 and -4.1% on 2019). An inventory of 34.4 million flights is expected to be available in 2023 (+24.4% on 2022, -11.5% on 2019).

Efficiency levels are high with an expected average passenger load factor of 80.9% for 2023. That is very near the 2019 record performance of 82.6%.

IATA's May 2023 passenger polling data supports the optimistic outlook, with 41% of travelers indicating they expect to travel more in the next 12 months than in the previous year and 49% expect to undertake the same level of travel. Moreover, 77% of respondents indicated that they were already traveling as much or more than they did pre-pandemic.

Expenses are expected to grow to $781 billion (+8.1% on 2022 and -1.8% on 2019).

High crude oil prices were exaggerated for airlines as the crack spread (premium paid to refine crude oil into jet fuel) averaged more than 34% for 2022—significantly above the long-run average. As a result, fuel was responsible for almost 30% of total expenses. In recent months, the crack spread has narrowed, and the full year average crack spread is expected to fall to around 23%, which is more closely aligned with the historical average rate. Fuel costs will account for 28% of the average cost structure, which is still above the 24% of 2019.

The economic and geopolitical environment presents several risks to the outlook. With just $22.4 billion of operating profit (2.8%) standing between $803 billion of revenues and $781 billion in expenses, industry profitability is fragile and could be affected (positively or negatively) by a number of factors. In particular, consideration should be given to:

While the global airline industry is expected to return to profitability in 2023, financial performance across regions remains diverse. The positive news is that industry financials are improving in all regions from the COVID-related depths of 2020, although not all regions are expected to deliver a profit this year.

Capacity (ASK)VS 2019

North America remains the standout region in terms of financial performance. Consumer spending has remained solid, despite cost-of-living pressures, and the demand for air travel remains robust; air passenger demand is forecast to exceed its pre-COVID (2019) level this year.

Capacity (ASK)VS 2019

Notwithstanding the various capacity constraints experienced over the summer period, European carriers were able to return to profit in 2022. That profitability will strengthen further in 2023. The key regional risks relate to the war in Ukraine, labor unrest and concerns about economic performance in some key countries.

Capacity (ASK)VS 2019

Now that all economies in the region have lifted COVID travel restrictions, the industry recovery is underway. A sharp rise in both passenger volumes and capacity is expected to be reflected in a sizeable improvement in 2023 financial results and a narrowing of the gap to other regions.

Capacity (ASK)VS 2019

The region's return to profitability in 2022 was supported by a significant increase in the passenger load factor of almost 25 percentage points, outstripping the performance of the other regions. At the same time, Middle East carriers have been swiftly rebuilding their international networks and in March 2023, the region's international connectivity had returned to 98% of its pre-COVID level.

Capacity (ASK)VS 2019

Passenger volumes are recovering quickly, but the financial performance varies considerably across the region. The region will remain in the red, although some airlines are expected to post solid profits. Overall, industry financial performance is expected to continue to improve, but a challenging economic backdrop in a number of countries in the region is dampening the pace of recovery.

Capacity (ASK)VS 2019

Africa remains a difficult market in which to operate an airline, with economic, infrastructure and connectivity challenges impacting the industry performance. Nonetheless, despite these challenges, there is still robust demand for air travel in the region which underpins the continued move towards a return to overall industry profitability.

The improvement in industry financial performance in 2022 outpaced previous expectations. Net industry losses for 2022 are now estimated to be -$3.6 billion, a strengthening from the previously estimated -$6.9 billion loss (December 2022). At the operating level, and notwithstanding the wide variation in performance, the latest data point to the industry having returned to profit in 2022 on a pre-tax basis.

"Resilience is the story of the day and there are 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. That's a big ‘to do’ list to achieve with just a 1.2% net profit margin. That's why we call on governments to keep their focus on initiatives that will strengthen safe, sustainable, efficient, and profitable connectivity," said Walsh.

"Priorities for 2023 include SAF production incentives to accelerate progress toward net zero carbon emissions, ensuring the integrity of CORSIA as the economic measure applied to international aviation, eliminating inefficiencies in air traffic management and applying global standards consistently," said Walsh.

Passengers are counting on a safe, sustainable, efficient and profitable airline industry. A recent IATA poll of travelers in 11 global markets revealed that 81% of those surveyed emerged from the pandemic with a greater appreciation of the freedom that flying makes possible. The same study also demonstrated the important role that travelers see the airline industry playing:

> Read Willie Walsh's Speech

> View the Economic Outlook presentation (pdf)

> View the Global Outlook for Air Transport Report (pdf)

> View Industry Statistics Data Tables (pdf)

For more information, please contact:

Corporate CommunicationsTel: +41 22 770 2967Email: [email protected]

Notes for Editors: