THE INTERNATIONAL Air Transport Association expects airlines to post billions in losses for 2022 but highlighted the strength of the air cargo industry.
IATA expects airline net losses to reach US$6.9 billion for 2022, an improvement on the US$9.7-billion-loss forecast in IATA’s June outlook.
The organisation noted the projections are “significantly better” than losses of US$137.7 billion in 2020 and US$42 billion in 2021.
It said improved prospects for 2022 stem largely from strengthened yields and strong cost control in the face of rising fuel prices.
IATA said air cargo revenues played a key role in cutting losses, with revenues expected to reach US$201.4 billion in 2022.
“This is an improvement compared with the June forecast, largely unchanged from 2021, and more than double the US$100.8 billion earned in 2019,” IATA director general Willie Walsh said.
However, most other factors reflected a downgrade of GDP growth expectations in 2022 and delays in lifting Covid-19 restrictions in several markets, particularly China.
IATA anticipated cargo demand to exceed 2019 levels by 11.7%, but said these predictions are now more likely be moderated to 98.4% of 2019 levels.
Mr Walsh said airlines were able to cut their losses in 2022 in the face of rising costs, labour shortages, strikes, operational disruptions and growing economic uncertainty.
“With some key markets like China retaining restrictions longer than anticipated, passenger numbers fell somewhat short of expectation,” he said.
“We’ll end the year at about 70% of 2019 passenger volumes. But with yield improvement in both cargo and passenger businesses, airlines will reach the cusp of profitability.”
IATA expects the airline industry to tip into profitability in 2023.
It anticipates airlines will earn a global net profit of US$4.7 billion on revenues of US$779 billion (0.6% net margin) next year.
But IATA said air cargo markets could come under increased pressure in 2023.
It expects revenues to be $US149.4 billion, which is US$52 billion less than 2022 but still US$48.6 billion stronger than 2019.
Because of economic uncertainties, IATA estimates cargo volumes will decrease to 57.7 million tonnes, from a peak of 65.6 million tonnes in 2021.
As belly capacity grows in line with the recovery in passenger markets, yields are expected to take a significant step back.
IATA expects a fall of 22.6% in cargo yields, mostly in the latter part of the year when the impact of inflation-cooling measures are expected to bite.
Putting the yield decline in context, it said cargo yields grew by 52.5% in 2020, 24.2% in 2021 and 7.2% in 2022. It added even the sizable and expected decline leaves cargo yields well-above pre-Covid levels.
IATA also outlined risks as the airline industry transitions into the coming year.
It said the economic and geopolitical environment presents several potential risks to the 2023 outlook.
“While indications are that there could be an easing of aggressive inflation-fighting interest rate hikes from early 2023, the risk of some economies falling into recession remains,” Mr Walsh said.
“Such a slowdown could affect demand for both passenger and cargo services. It would, however, likely come with some mitigation in the form of lower oil prices.”
In the Asia-Pacific region specifically, IATA expects airlines to post a loss of US$10.0 billion in 2022, narrowing to a US$6.6 billion loss in 2023.
“Asia-Pacific is critically held back by the impact of China’s zero-Covid policies on travel and the region’s losses are largely skewed by the performance of China’s airlines who face the full impact of this policy in both domestic and international markets,” Mr Walsh said.
“Taking a conservative view of progressive easing of restrictions in China over the second half of 2023, we nevertheless expect strong pent-up demand to fuel a quick rebound in the wake of any such moves.
“The region’s performance receives a significant boost from profitable air cargo markets, in which it is the largest player.”
