Airlines set for first profit since 2019 next year

Global airlines are forecast to return to profit for the first time since 2019 next year, as the industry recovers from the impact of the Covid pandemic and demand for travel remains strong despite a weakening economy.

The International Air Transport Association, an industry body, on Tuesday said it expected airlines to report a net profit of $4.7bn in 2023, after racking up more than $185bn of losses during the previous three years of limited flying because of government travel restrictions.

Willie Walsh, Iata’s director-general and a former boss of British Airways, said the economic recovery highlighted the airline industry’s “resilience”.

“The expected profits for 2023 are razor thin. But it is incredibly significant that we have turned the corner to profitability . . . the industry has great capability to adjust to fluctuations in the economy,” he said.

Passengers rushed back to the skies as border restrictions eased across most countries this year, and demand is expected to hit 85.5 per cent of 2019 levels in 2023, up from 70 per cent this year.

Still, Walsh warned there was still “much more ground to cover” to put the industry “on a solid financial footing”.

With the sector’s profitability historically reliant on a clutch of North American and European carriers, Walsh said many other airlines were still “struggling” with high costs including fuel, “onerous” regulation and inefficient infrastructure.

Airlines in Africa, Latin America and Asia-Pacific are forecast to post losses in 2023, and Iata said China’s zero-Covid policies had “critically held back” the recovery of air travel across Asia.

Globally, airlines are expected to post the $4.7bn profit on $779bn in revenues, a net profit margin of just 0.6 per cent, down from 3.1 per cent in 2019.

“With such thin margins, even an insignificant shift . . . has the potential to shift the balance into negative territory,” Walsh said.

The biggest question hanging over the industry is whether demand for travel can stay strong as consumers tighten their belts in the face of a cost of living crisis in many parts of the world.

So far, no big airline has reported a significant slowdown in sales.

Johan Lundgren, chief executive of UK low-cost carrier easyJet, last week said there was “some uncertainty” about people’s appetite to travel, particularly for the summer season next year.

But demand had “remained strong”, he added, for peak periods including the recent October half-term, Christmas, New Year and Easter.

Airlines’ share prices have risen sharply as investors have welcomed these signs of resilient demand.

The MSCI World Airlines Index has risen 23 per cent since the start of October, but is still more than a third below its pre-pandemic level.