According to a report published on Tuesday by an industry group, the global airline market will return to profitability in 2020 for the first time since 2019 as a result of a continuing uptick in air travel after almost two years of limitations imposed as a result of COVID-19.
The epidemic caused airlines to lose tens of billions of dollars in 2020 and 2021, but air traffic has largely rebounded despite the fact that certain airports have had difficulty keeping up with demand.
The International Air Transport Association (IATA) forecasts that the airline sector will bring in a net profit of $4.7 billion in 2019, despite the fact that there will be more than 4 billion people flying. Prior to then, it had merely said that profits were “within reach” in 2023.
IATA has reduced its prediction for industry-wide losses to $6.9 billion for 2022, down from $9.7 billion previously projected.
IATA Director General Willie Walsh made the following statement regarding the anticipated return to profitability in 2023: “That is a great achievement considering the scale of the financial and economic damage caused by government-imposed pandemic restrictions.” Walsh made this remark in response to a question about when the industry is expected to resume making a profit.
However, the former head of British Airways and IAG issued a warning that many airlines would continue to suffer in the next year. He cited restrictions, high expenses, and contradictory government policies as the reasons for this, as well as the reopening of a decades-long war of words with airports.
“It is really vital that everyone has a clear understanding of how precarious the economic recovery is. “Yes, we are rebounding; yes, the momentum is increasing; yes, we anticipate it to continue to improve in 2023,” Walsh said during an annual media conference. “Yes, we expect it to continue to improve in 2023.”
“But the margins we are working with are extremely thin, and we cannot accept a scenario in which airports in particular strive to exploit airlines and their customers by significantly increasing the amount of money they charge for using the airport.” Every each penny makes a difference.”
Airports are upset that the state did not provide them with the same level of assistance that was given to conventional carriers, and they are pointing the fault back at airlines for the disruption in travel caused by the epidemic. The trade group representing the airport business did not immediately respond to requests for comment.
According to the International Aviation Transport Association (IATA), worldwide air traffic levels will recover to pre-COVID or 2019 levels by the year 2024, headed by the United States and with Asia-Pacific “significantly underperforming.”
The Chief Economist of the International Air Transport Association (IATA), Marie Owens Thomsen, issued a warning that the risk to the most recent estimates on the industry remained “skewed to the negative,” and that China would be the “key variable.”
Beijing has started to ease up on its stringent zero-COVID restrictions, which were aimed to eradicate transmission. According to two individuals familiar with the situation who spoke to Reuters on Monday, the organisation may reveal ten more COVID-19 easing measures as early as Wednesday. These would be in addition to the twenty that were disclosed in November.
If China does not relax its regulations, it will have an adverse effect on the profitability of airlines.
According to what was read, another danger associated with the forecast for 2023 is the possibility that certain economies could enter a recession.
Walsh was particularly critical of aircraft manufacturers that were having trouble meeting delivery deadlines and pointing the finger at their supply networks.
“It is the source of a great deal of annoyance. This will result in an increase to the cost base. When I have private conversations with CEOs, it seems to create a lot of animosity, he remarked.
Walsh said that airlines had made it through the worst of the downturns, but that the fragmented market in Europe was still something to keep an eye on.
“I believe that there is still a struggle for certain airlines, since as we have seen, the sector as a whole is still only marginally profitable. In point of fact, we are able to announce that we have broken even in Europe,” added Walsh.
Therefore, it is evident that there is still a great deal of financial strain. The key distinction is that airlines are now making a profit. The most important thing to consider was liquidity.