Airline profitability outlook will strengthen this year, reveals a recent report by IATA. After COVID, a net profit margin of 1.2% is something to celebrate, avers Willie Walsh, Director General, IATA. Recording a 0.6% net profit margin is indeed a challenge for the industry.
Stronger profitability is supported by several positive developments. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices are still high, but have moderated over the first half of the year, said Willie Walsh, Director General, IATA, while mentioning how financial performance of the airlines is beating all expectations this year.
Revealing statistics, Walsh said, “The net profitability has returned with 1.2 per cent, which is a major achievement. It was achieved at a time of economic uncertainties,and secondly it follows the deepest losses in aviation’s history (US$183.3 billion of net losses for 2020-2022 for an average net profit margin drop of 11.3 per cent in that period). It should be noted the airline industry entered the global health crisis at the end of a historic profit streak that saw an average net profit margin of 4.2 per cent for the 2015-2019 period.”
Commenting about the economic uncertainties, the IATA director general said, “The uncertainties have not dampened the people’s desire to travel, even as the ticket prices absorbed elevated fuel costs. After the losses borned by the industry during the pandemic, even a net profit margin of 1.2 per cent was something to celebrate.But with the airline industry earning US$2.25 per passenger on an average, repairing damaged balance sheets and providing the investors with sustainable returns on their capital, will continue to be a challenge for many airlines”.
Resilience is the story of the day and there are many good reasons for optimism. Achieving profitability at an industry level after the depths of the COVID crisis opens up much potential for airlines to reward investors, fund sustainability, and invest in efficiencies to connect the world even more effectively. That is a big ‘to do’ list to achieve with just a 1.2 per cent net profit margin. That is why we call on the governments to keep their focus on initiatives that will strengthen safe, sustainable, efficient, and profitable connectivity,” said Walsh.
Tourists are counting on efficient and profitable airline industry. A recent IATA poll of travellers in 11 global markets revealed 81 per cent of them emerged from the pandemic with a greater appreciation of the freedom that flying makes possible. He listed some priorities for 2023, including SAF production to reduce net zero emissions, integrating CORSIA as economic measure applied to global aviation, removing inefficient air traffic management, and application of global standards.