AS the pace of recovery quickens, the IInternational Air Transport Association (IATA) says the airline industry’s 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%, an improvement from losses of $137.7 billion (-36.0% net margin) in 2020 and $42.1 billion (-8.3% net margin) in 2021.
In particular, industry-wide profitability in 2023 appears within reach with North America already expected to deliver an $8.8 billion profit in 2022.
Other highlights reported by IATA include:
- 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).
- Industry optimism and commitment to emissions reductions are evident in the expected net delivery of over 1,200 aircraft in 2022.
- Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fueling a resurgence in demand that will see passenger numbers reach 83% of pre-pandemic levels in 2022.
- Despite economic challenges, cargo volumes are expected to set a record high of 68.4 million tonnes in 2022.
“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, IATA’s Director General.
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).
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. As pent-up demand is released with the easing of travel restrictions, yields are expected to rise 5.6%. That follows a yield evolution of -9.1% in 2020 and +3.8% in 2021.
IATA cited risk factors such as the war in Ukraine, inflation, interest rates and exchange rate as well as ongoing Covid 19 restrictions in some markets, including China whose domestic market alone accounted for about 10% of global traffic in 2019.
Regional roundup: APAC losses expected to decline
Financial performance in all regions is expected to improve in 2022 compared with 2021 (all regions improved in 2021 compared with 2020 as well).
North America is expected to continue to be the strongest performing region and the only region to return to profitability in 2022. Supported by the large US domestic market and the re-opening of international markets, including the North Atlantic, net profit is forecast to be $8.8 billion in 2022. Demand (RPKs) is expected to reach 95.0% of pre-crisis (2019) levels, and capacity 99.5%.
Europe: In Europe, the Russia-Ukraine war will continue to disrupt travel patterns within Europe and between Europe and Asia-Pacific. However, the war is not expected to derail the travel recovery, with the region edging closer to profitability in 2022, with a net loss of $3.9 billion forecast. Demand (RPKs) is expected to reach 82.7% of pre-crisis (2019) levels, and capacity 90.0%.
For Asia-Pacific airlines, strict and enduring travel restrictions (notably in China), along with an uneven vaccine rollout, have seen the region lag in the recovery to date. As the restrictions diminish, travel demand is expected to increase quickly. Net losses in 2022 are forecast to decline to $8.9 billion. Demand (RPKs) is expected to reach 73.7% of pre-crisis (2019) levels, and capacity 81.5%.
Traffic volumes in Latin America recovered robustly in 2021, supported by domestic markets and relatively fewer travel restrictions in many countries. The financial outlook for some airlines, nevertheless, remains fragile and the region is expected to record a net loss of $3.2 billion this year. Demand (RPKs) is expected to reach 94.2% of pre-crisis (2019) levels, and capacity 93.2%.
In the Middle East, this year’s re-opening of international routes and long-haul flights in particular will provide a welcome boost for many. Region-wide, net losses are expected to narrow to $1.9 billion in 2022, from a $4.7 billion loss last year. Demand (RPKs) is expected to reach 79.1% of pre-crisis (2019) levels, and capacity 80.5%.
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%.
