IATA Expects Airline Industry Net Profit To Reach US$9.8 Billion In 2023

The airline industry’s net profit is expected to reach US$9.8 billion (RM44.8 billion) in 2023 with a 1.2 percent margin, which is more than double the previous forecast of US$4.7 billion (RM21.5 billion) made in December 2022, said the International Air Transport Association (IATA) today,.

It said profitability is estimated to strengthen in 2023, driven by positive developments including increasing travel demand.

IATA director-general Willie Walsh said this year’s financial performances are also beating expectations.

“The stronger profitability is supported by several positive developments. China lifted covid-19 restrictions earlier 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,” he said in a statement today.

Total revenue is expected to grow 9.7 percent year-on-year to US$803 billion (RM3.67 trillion), the first time revenue is topping the US$800 billion (RM3.66 trillion) mark since 2019’s US$838 billion (RM3.83 trillion).

IATA said passenger revenue is expected to reach US$546 billion or RM2.49 trillion (+27 percent in 2022, -10 percent in 2019.)

With Covid-19 restrictions now removed in all major markets, the industry is expected to reach 87.8 percent of the 2019 level of revenue passengers per kilometre for the year, with stronger passenger traffic as the year progresses.

It said the high demand for travel in many markets is keeping yields strong with a modest 1.1 percent decline expected in 2023 compared to 2022, following increases of 9.8 percent in 2022 and 3.7 percent in 2021.

For 2023, expense growth is expected to be contained with an 8.1 percent annual increase.

IATA noted that jet fuel costs are expected to average at US$98.50 per barrel with a total fuel bill of US$215 billion (RM984.1 billion), cheaper than the US$111.90 per barrel previously expected in December 2022 and the average cost of US$135.60 per barrel in 2022.

The industry’s operating profits are expected to reach US$22.4 billion (RM102.5 billion) in 2023, more than double the US$10.1 billion (RM46.2 billion) operating profit estimated in 2022.

Some 4.35 billion people are expected to travel in 2023, which is close to the 4.54 billion who flew in 2019.

Walsh said 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 percent is something to celebrate. But with airlines just making US$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,” he added.

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