Istanbul June 5 2023: Global airlines more than doubled their 2023 industry profit forecast to $9.8 billion from $4.7 billion on Monday cheered by strong travel demand as the sector recovers from the COVID-19 pandemic.
“The pandemic years are behind us, and borders are open as normal. Despite economic uncertainties, people are flying to reconnect, explore, and do business. Latest data show passenger traffic at over 90% of 2019 levels. Airports are busier, hotel occupancy is rising, local economies are reviving, and the airline industry has moved into profitability” Director General Willie Walsh told the annual meeting of the International Air Transport Association (IATA).
“Margins are, however, wafer thin. With $803 billion of revenues, airlines will share $9.8 billion in net profit this year. Put another way, airlines will make, on average, $2.25 per passenger. So, the value retained by airlines for the average plane trip won’t even buy a subway ticket in NYC. Clearly that level of profitability is not sustainable. But considering we lost $76 per passenger in 2020, the velocity of the recovery is strong” he added.
Challenges remain. Inflation continues, cost pressure is acute, and in some areas, labor is in short supply. Unfortunately, many of those we do business with are adding to these pressures.
OEM suppliers have been far too slow in dealing with supply chain blockages that are both raising costs and limiting our ability to deploy aircraft. Airlines are beyond frustrated. A solution must be found.
Oil companies did very well on our tab while the crack spread for jet fuel was at historic highs for most of 2022 until April this year.
And there are grievous examples of some airports and ANSPs shifting the costs of their inefficiency to airlines.
On this point, I can now confirm that Schiphol Airport has no shame. After a self-made operational disaster in 2022 the airport continues its three-year 37% charges hike—with 12% this year.
In South Africa, airports want a 38% charges increase, only to be outdone by ATC demands for a 63% hike.
And, back to Europe, airlines are paying for a EUR1.9 billion addition to the air traffic management cost base in 2022. You’d expect good performance. But delays were triple what was anticipated. And capacity and environment targets were missed.
With such bad behavior on open display, calls for lighter touch economic regulation of our monopoly suppliers must not be taken seriously by any government.
Considering these many challenges, that airlines are turning a profit at the industry level is truly impressive.
