Global airlines are expected to narrow losses in 2022 amid a strong rebound in air travel demand following the Covid-19 pandemic, with a possible return to profitability in 2023, the International Air Transport Association has said.
Airlines are expected to post $9.7 billion in losses this year, a sharp improvement from losses of about $42bn in 2021, Iata's director general Willie Walsh said during the industry body's annual general meeting on Sunday in Doha.
“The industry is leaner, tougher, nimbler,” he said. “Industry-wide profitability is on the horizon for 2023.”
“Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty. 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,” he said.
However, a “challenging” business environment may threaten the fragile recovery of the industry amid rising inflation, weaker economic growth and higher oil prices, Mr Walsh said.
Among the many negative effects an escalation of the Russia-Ukraine war could have on aviation, rising fuel costs and dampened demand due to lowered consumer sentiment would be paramount, Iata said.
Fixing battered balance sheets carrying $650bn in debt would be another major challenge for airlines this year.
“There is no way to sugar coat the bitter economic and political realities we face,” Mr Walsh told the meeting of airline chiefs. “But the desire to travel and the necessity of moving goods are both solid.”
The Iata boss also hit back at global airports that have raised their infrastructure charges, hurting the recovery of airlines.
London Heathrow was allowed to increase charges by 50 per cent while Amsterdam Schiphol confirmed a 37 per cent increase from 2022 to 2024.
Dublin joined the group, seeking an 80 per cent increase from 2023 to 2026, according to Iata.
Out of the top 100 airports globally, more than half announced increases for 2022 and 2023 amid expectations that their airline customers will make up for revenue they did not genera during the pandemic, Mr Walsh said.
“As the industry returns to more normal levels of production and with high fuel costs likely to stay for a while, profitability will depend on continued cost control,” he said.
“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.”
Aviation was among the industries hardest-hit by the pandemic, which had a domino effect on tourism, hospitality and supply chains. However, the sector is making a gradual recovery.
While the underlying demand for travel is strong, there is a downside risk should governments choose to return to knee-jerk, border-closing responses to future outbreaks, according to Iata.
“Governments must have learnt their lessons from the Covid-19 crisis. Border closures create economic pain but deliver little in terms of controlling the spread of the virus,” Mr Walsh said.
“With high levels of population immunity, advanced treatment methods and surveillance procedures, the risks of Covid-19 can be managed.”
Meanwhile, in the Middle East, this year’s reopening of international routes and long-haul flights, in particular, will provide “a welcome boost”, according to Iata.
Region-wide, net losses are expected to narrow to $1.9bn in 2022, from combined losses of $4.7bn loss last year, the aviation body said.
Demand is expected to reach 79.1 per cent of 2019 levels while capacity is set to be more than 80 per cent.
The next Iata AGM is scheduled to take place from June 4 to June 6 next year in Istanbul.