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Airlines will return to profitability in 2023 after three-year slump: IATA

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The worldwide airline industry is ready to return to profitability again next yr following a near-three yr downturn fueled by the Covid-19 pandemic, an industry body said Tuesday.

The International Air Transport Association (IATA) said it expects the industry to post a “small” net profit of $4.7 billion in 2023, with greater than 4 billion passengers set to take to the skies.

Director General Willie Walsh told CNBC the predictions marked a “step in the correct direction” for an industry clobbered by pandemic-induced travel restrictions and resultant staff shortages.

“The recovery goes well,” Walsh told CNBC’s Julianna Tatelbaum. “[There’s] still an extended strategy to go to get back to where we were in 2019, but we’re heading in the correct direction.”

The forecasted uplift, outlined in a recent report, points to the primary profitable yr for the airline business since 2019, when net profits were $26.4 billion, and signal an improvement on the association’s June outlook, when it said profitability was “within sight.”

For 2022, IATA also reduced its forecast for industry-wide losses to $6.9 billion from $9.7 billion in June’s outlook.

Challenges ahead ‘relatively small’

The airline industry has been hemorrhaging billions of dollars lately as coronavirus health restrictions have weighed on air travel and consumer demand.

In 2020, through the first yr of the pandemic, the airline industry suffered losses of $137.7 billion, based on IATA. In 2021, those losses narrowed only partially to $42 billion as staff shortages and other disruptions continued to hamper the industry at the same time as air travel in some places substantially resumed.

There might be challenges in 2023. But, quite truthfully, these challenges are relatively small in comparison with what we have come through.

Willie Walsh

Willie Walsh, director general, IATA

Still now, wider pressures proceed to weigh on the industry and the broader global economy, Walsh noted. But he said the industry is now higher positioned to weather potential headwinds going forward.

“There might be challenges in 2023,” Walsh said. “But, quite truthfully, these challenges are relatively small in comparison with what we have come through.”

“That is why we’re optimistic that we will manage a way through these and get the industry back into very small levels of profitability, but profitability nonetheless,” he added.

Travel disruption set to ease

The airline industry is forecast to record total revenues of $779 billion in 2023, based on IATA, led primarily by a continued rebound in passenger demand.

North America is ready to steer the charge, posting the best profit, followed by Europe and the Middle East. Covid-19 restrictions in China, nonetheless, will proceed to weigh on travel demand within the Asia-Pacific region, which, alongside Latin America, is forecast to record additional losses next yr.

“Passenger demand is anticipated to succeed in 85.5% of 2019 levels over the course of 2023 … with 4.2 billion travelers expected to fly,” the report said.

Flight cancellations, delays and staff walkouts became commonplace at many major airport in 2022 as airlines struggled to handle increased demand following staff layoffs.

Andreas Solaro | Afp | Getty Images

Cargo markets, meanwhile — which became a source of life support for airlines through the pandemic — will proceed to account for a sizeable share of revenues in 2023, albeit at a lower level than recent years.

“Revenues are expected to be $149.4 billion, which is $52 billion lower than 2022 but still $48.6 billion stronger than 2019,” based on the report.

The report also noted that higher costs regarding energy prices and labor, skill and capability shortages will proceed to weigh on revenues but at a lower level.

The forecasts follow a chaotic yr for air travel, with flight cancellations, delays and staff walkouts commonplace at many major airports. Nevertheless, Walsh said he thinks most of that disruption is now over, and passengers should expect a smoother travel experience going forward.

“I feel most of that’s behind us,” said Walsh. “We must always be confident that those issues have been resolved. Actually there is totally no excuse for the airports to not deliver on good service as we go into 2023.”

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