The airline industry is looking at profitability in 2023, with North America expected to deliver an $8.8 billion profit in 2022 alone, the International Air Transport Association (IATA) says in its latest report.
As the pace of recovery from the Covid-19 crisis quickens, the IATA says industry losses are expected to reduce to $9.7 billion in 2022. It is an improvement from the October 2021 forecast that pegged losses at $11.6 billion. Notably, in 2020 and 2021, the airline industry across the world suffered huge losses worth $137.7 billion (-36.0% net margin) and $42.1 billion (-8.3% net margin), respectively.
"Efficiency gains and improving yields are helping airlines to reduce losses even with rising labour and fuel costs," says IATA, adding that there has been a 40% increase in the world oil price. "Industry optimism and commitment to emissions reductions are evident in the expected net delivery of over 1,200 aircraft in 2022," says IATA.
The global airline body thinks passenger demand will reach 83% of the pre-pandemic levels in 2022. "Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fueling a resurgence in demand that will see passenger numbers reach 83% of pre-pandemic levels in 2022," it adds.
Moreover, despite economic challenges, cargo volumes are also expected to set a record high of 68.4 million tonnes in 2022. “Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty. Losses will be cut to $9.7 billion this year and profitability is on the horizon for 2023. It is a time for optimism, even if there are still challenges on costs, particularly fuel, and some lingering restrictions in a few key markets,” said Willie Walsh, IATA’s director-general.
Airlines across the world are reporting better revenues as Covid-19 restrictions ease and people return to travel. The challenge for 2022 is to keep costs under control. Walsh also says profitability will depend on continued cost control by airlines. "Our suppliers, including airports and air navigation service providers, need to be as focused on controlling costs as their customers to support the industry’s recovery,” he adds.
Industry revenues are expected to reach $782 billion in 2022, which is about 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8 million, which is 86.9% of 2019 levels (38.9 million flights), says IATA.
Passenger revenues are expected to account for $498 billion of industry revenues, more than double the $239 billion generated in 2021. On the other hand, cargo revenues are expected to account for $191 billion of industry revenues. That is down slightly from the $204 billion recorded in 2021, but nearly double the $100 billion achieved in 2019.
Overall, the industry is expected to carry over 68 million tonnes of cargo in 2022, which is a record high. As the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021.
In terms of expenses, the airline industry's overall expenses are expected to rise to $796 billion in 2022, up 44% from 2021, which reflects both the costs of supporting larger operations and the cost of inflation. At $192 billion, fuel is the industry’s largest cost item in 2022 (considering Brent crude at $101.2/barrel and $125.5 for jet kerosene). Fuel represents 24% of overall costs, up from 19% in 2021. In 2022, airlines are expected to have 321 billion litres of fuel compared to the 359 billion litres consumed in 2019.
Labour is the second-highest operational cost item for airlines. Direct employment in the sector is expected to reach 2.7 million, up 4.3% in 2021 as the industry rebuilds from the significant decline in activity in 2020. Employment is still, however, somewhat below the 2.93 million jobs in 2019 and is expected to remain below this level for some time.