Global Airline Industry Recovers from COVID-19 Setbacks
Profitability Returns After Three Years of Losses
The global airline industry has managed to navigate through the turbulence caused by the COVID-19 pandemic, returning to profitability in 2023 after three years of significant losses. The International Air Transport Association (IATA) estimates that commercial airlines ended 2023 with a net profit of $27.4 billion, a significant improvement from the loss of $3.5 billion in 2022. This profit is also higher than the IATA's previous prediction of around $23 billion in December.
Industry's Recovery Hailed at IATA's Annual General Meeting
Willie Walsh, the Director General of IATA, praised the industry's successful recovery from the pandemic at the 80th Annual General Meeting in Dubai. However, he also cautioned that the profit margins of the industry are still very thin. Walsh acknowledged the hard work that has helped the industry recover, but also highlighted the challenges it still faces, including a highly competitive environment, lack of competition in the supply chain, onerous regulation, and persistent supply chain issues.
Passenger Revenue Exceeds 2019 Total
Passenger revenue is projected to reach $744 billion, surpassing the 2019 total by over 22 percent. This increase is attributed to both a rise in passenger volume and improvements in passenger yields. As shown in a chart by Felix Richter from Statista, net profits are predicted to rise to $30.5 billion this year. However, Walsh notes that this is still insufficient to build financial resilience and invest in a more sustainable future.
Challenges Remain Despite Path to Sustainable Profits
Despite the industry's path to sustainable profits, challenges remain. Walsh pointed out that the return on invested capital of 5.7 percent is significantly lower than the cost of capital, which is over 9 percent. Moreover, earning just $6.14 per passenger indicates the thinness of the industry's profits.
Historic High Revenues Expected in 2024
Looking forward, the IATA anticipates that industry revenues will reach a record high of $996 billion in 2024, with an expected 38.7 million flights, just 0.2 million short of the 2019 supply.
What's Your Take?
The airline industry's recovery from the COVID-19 pandemic is certainly noteworthy. However, it's clear that challenges still remain. What are your thoughts on this? Do you think the industry will continue to thrive, or are there more obstacles on the horizon? Share your thoughts with your friends and sign up for the Daily Briefing, which is delivered every day at 6pm.
