Iata reports an improved financial forecast for the world’s airlines

20th June 2022

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The world representative body of the airline industry, the International Air Transport Association (Iata), has upgraded its forecast for the sector’s financial performance this year. This is the consequence of an accelerating recovery from the Covid-19 pandemic. The industry globally looks set to return to profitability next year, while North American airlines are expected to achieve profitability this year.

“Airlines are resilient,” affirmed Iata director-general Willie Walsh. “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 total global losses now forecast for this year ($9.7-billion) are $1.9-billion less than in the previous (made in October last year) forecast of $11.6-billion. The net loss margin will be minus 1.2%. The sector’s losses last year had been $42.1-billion (a net loss margin of minus 8.3%), while in 2020 they had been $137.7-billion (a net loss margin rate of minus 36%). And North American carriers were now forecast to record a profit of $8.8-billion this year.

Airlines are achieving this much improved financial performance despite increasing fuel and labour costs. The sector’s fuel bill for this year is now expected to be $192-billion, representing 24% of total costs. Fuel was responsible for 19% of total airline costs last year.

As for labour, unit labour costs for this year are forecast to be almost exactly the same as they were in 2019, before the pandemic struck. Employment levels remain below those of 2019, and are likely to remain so for a while yet. It will take time to recruit, train and undertake background checks on new staff. In countries with low unemployment, labour costs are likely to rise. Worldwide, the industry’s wage bill is expected to increase by 7.9% this year, compared with last year, to a total of $173-billion, although the actual increase in jobs in the sector will only be 4.3%

“The reduction in losses is the result of hard work to keep costs under control as the industry ramps up,” he highlighted. “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 servicer providers, need to be as focused on controlling costs as their customers to support the industry’s recovery.”

Total airline revenues this year are forecast to come to $782-billion, a 54.5% increase over those for last year, and reaching 93.3% of 2019 revenues. Passenger revenues this year should be $498-billion (more than 100% up on the 2021 figure of $239-billion). Cargo revenues are predicted to be $191-billion (which would actually be a small decrease over the $204-billion accrued last year), amounting to an almost 100% increase over the $100-billion figure of 2019, the last pre-Covid year. In terms of payload, air cargo this year is forecast to total 68-million tons, which would be a record figure.

In terms of Iata’s regions, all of them are expected to perform better this year, compared with last year. They all also performed better last year compared with 2020. Obviously, North America will be (again) the strongest performing region. African airlines have been lagging, due to low vaccination rates across the continent, but Iata expects the region to start catching up with the other regions this year. The Asia-Pacific region has also lagged in its recovery, due to strict lockdowns and travel restrictions in China and to uneven vaccination rates. Travel patterns in Europe have been disrupted by the Russia-Ukraine War, but the conflict is not forecast to disrupt the recovery of air travel across the region.

 

Edited by Creamer Media Reporter

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