World Air Transport Summit opens in Qatar as Travel Recovery Rebuilds Airline Profitability

Doha 

By Moses Sserwanga

The International Air Transport Association (IATA) has announced an upgrade to its outlook for the airline industry’s 2022 financial performance as the pace of recovery from the COVID-19 crisis quickens. Presenting the forecast at he opening of a two day 78th IATA Annual General Meeting and World Air Transport Summit hosted by Qatar Airways -Mr. Willie Walsh, IATA’s Director General said that aviation Industry losses are expected to reduce to -$9.7 billion (improved from the October 2021 forecast for an $11.6 billion loss) for a net loss margin of -1.2%.

That is a huge improvement from losses of $137.7 billion (-36.0% net margin) in 2020 and $42.1 billion (-8.3% net margin) in 2021. Industry-wide profitability in 2023 appears within reach with North America already expected to deliver an $8.8 billion profit in 2022.
 

Mr Walsh explained that he efficiency gains and improving yields are helping airlines to reduce losses even with rising labor and fuel costs (the latter driven by a +40% increase in the world oil price and a widening crack spread this year partly attributed to the war in Ukraine .
 

“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,” said Willie Walsh stated while giving an optimistic view of he industry dusting itself from the devastating effects of two year Covid-19 lockdowns .

The IATA boss noted that revenues are rising as COVID-19 restrictions ease and people return to travel. The challenge for 2022 is to keep costs under control.

“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,” he added.



Revenues

Industry revenues are expected to reach $782 billion (+54.5% on 2021), 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8 million, which is 86.9% of 2019 levels (38.9 million flights). Out of this passenger revenues are expected to account for $498 billion of industry revenues, more than double the $239 billion generated in 2021. Scheduled passenger numbers are expected to reach 3.8 billion, with revenue passenger kilometers (RPKs) growing 97.6% compared with 2021, reaching 82.4% of 2019 traffic.
 

At the same time ,cargo revenues are expected to account for $191 billion of industry revenues. That is down slightly from the $204 billion recorded in 2021, but nearly double the $100 billion achieved in 2019. Overall, the industry is expected to carry over 68 million tonnes of cargo in 2022, which is a record high. As the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021. That only partially reverses the yield increases of 52.5% in 2020 and 24.2% in 2021.

In Africa, lower vaccination rates have dampened the region’s air travel recovery to date. However, some catching up is likely this year, which will contribute to an improved financial performance. Net losses are forecast to be $0.7 billion in 2022. Demand (RPKs) is expected to reach 72.0% of pre-crisis (2019) levels, and capacity 75.2%.

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