IATA: Recovering Passenger Demand is Rebuilding Airline Profitability

LONDON – On June 20, IATA, also known as the International Air Transport Association revised its outlook for the airline industry’s financial performance during 2022 in the wake of the Covid pandemic.

IATA’s Latest Outlook

Compared to their initial outlook for 2022, it appears that the recovery in the air travel industry is performing on a much quicker basis compared to what experts within the industry had initially thought based on airline bookings and expected projections at that time.

Back in October 2021 during IATA’s initial 2022 forecast, they expected industry losses of $11.6 billion, however, now on their revised forecast, IATA is expecting an industry loss of $9.6 billion, from a net loss margin of -1.2%.

This is even despite the huge 40% mark-up in world oil prices.

This new expectation is a stark improvement compared to 2021’s loss of $42.1 billion with a -8.3% net margin and 2020’s large loss of $137.7 billion with a -36% net margin.

This year, the North American aviation sector is expecting a profit of $8.8 billion and IATA wholly believes that profitability industry-wide will be achievable in 2023 given the promise that 2022 is bringing increased passenger demand almost worldwide.

IATA is also forecasting that during 2022 we should see around a total of 1,200 new aircraft deliveries worldwide, which shows that not only passengers levels are beginning to get back to pre-Covid times, but also airlines are wanting to renew their fleet, especially with airlines also wanting to achieve net-zero carbon emissions.

They are also expecting that passenger demand will be up to 83% of what we saw pre-Covid as well as cargo volumes yet again due to setting another record high of 68.4 million tonnes in 2022.

In terms of expected revenues for the industry, IATA is expecting them to reach $782 billion which is a 54.5% increase compared to 2021 and is 93.3% of what they saw in 2019.

Flights operated are expected to be around 33.8 million which makes up for 86.9% of 2019’s flights operated of 38.9 million.

Out of the expected $782 billion in revenues, IATA is expecting $498 billion of that number to come from passenger revenues as well as $191 billion from cargo revenues.

Interestingly, despite the lower revenues than 2019 figures, the industry’s expenses are expected to total around $796 billion, a 44% increase compared to 2021’s figure, part of which is to blame due to the dramatic increase in fuel prices. Out of the $796 expense figure, $192 billion is set to be just fuel alone, which would be the industry’s largest expense.

IATA’s Director General’s Comments…

IATA’s Director-General, Willie Walsh, has been talking about the latest revised 2022 performance forecast for the industry, saying:

“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.”

“The reduction in losses is the result of hard work to keep costs under control as the industry ramps up.”

“The improvement in the financial outlook comes from holding costs to a 44% increase while revenues increased 55%. 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.”

“And that encompasses the value chain. 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.”

Adding his thoughts about the COVID-19 pandemic, Walsh says:

“Governments must have learned their lessons from the COVID-19 crisis. Border closures create economic pain but deliver little in terms of controlling the spread of the virus.”

“With high levels of population immunity, advanced treatment methods, and surveillance procedures, the risks of COVID-19 can be managed.”

“At present, there are no circumstances where the human and economic costs of further COVID-19 border closures could be justified.”

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