The airline industry’s main lobby body is doubling its estimate for global net profit in 2023 as a surge in flying in North America and Europe drives up ticket prices.

Global industry profits are now expected to reach US$9.8 billion ($13.25 billion) this year, more than double the US$4.7 billion forecast in December, the International Air Transport Association (IATA) said in a statement on June 5. IATA expects some 4.35 billion passengers to travel in 2023, around 96% of 2019 levels.

“Taking everything into account we believe this will be a good year for aviation,” Willie Walsh, the director general of IATA, said in an interview with Bloomberg Television. Walsh said he was “cautiously optimistic” about the outlook.

Revenue is expected to rise to a combined US$803 billion in 2023, just US$35 billion shy of a record reached prior to the pandemic. A full rebound to profitability is still a way off, however, considering net income in 2019 was US$26.4 billion.

And despite the sector’s post-Covid-19 turnaround, several factors risk derailing IATA’s expectations. They include rising interest rates to combat spiraling inflation, the war in Ukraine, lingering supply chain issues and fears of a recession.

Financial performance also varies significantly from region to region.

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IATA’s improved 2023 forecast is driven particularly by Europe, where IATA now expects a gain of US$5.1 billion, having predicted a profit of just US$621 million in December.

Losses at Asian carriers though are expected to be US$6.9 billion in 2023, almost half 2022 estimates but worse than the US$6.6 billion deficit IATA predicted at the end of last year. Asia was slower to open than much of the rest of the world with China finally discarding the last of its Covid-19 measures in December.

In Latin America, the industry will remain in the red, although some carriers are expected to post solid profits, while Africa still “remains a difficult market in which to operate an airline, with economic, infrastructure and connectivity challenges impacting performance”.

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IATA warned that central banks raising interest rates posed a threat to the industry’s optimism and said that should a recession lead to job losses, the outlook may shift negatively.

For now however, soaring ticket prices are providing a balm to the economic wounds suffered during the travel lockdowns of Covid-19, when airlines were forced to ground their fleets, lay off staff and, in many cases, seek government assistance to survive.

“Achieving profitability at an industry level after the depths of the crisis opens up much potential for airlines to reward investors, fund sustainability and invest in efficiencies to connect the world even more effectively,” Walsh said. “That’s a big ‘to do’ list to achieve with just a 1.2% net profit margin.”

British Airways owner IAG SA posted a surprise quarterly profit last month and raised its outlook for the full year. Dubai’s Emirates and Singapore Airlines reported record earnings, with Australia’s Qantas Airways on course to follow suit.

<ul><li>Industry revenues are expected to reach US$803 billion in 2023, up 9.7% on 2022 but 4.1% lower than 2019. An inventory of 34.4 million flights is expected to be available in 2023.</li><li>Cargo revenues are expected to be US$142.3 billion versus $210 billion in 2021 and US$207 billion in 2022. Yields will be negatively impacted by the ramping-up of passenger capacity, which automatically increases available belly capacity for cargo, and the potential negative effects on international trade of economic cooling measures to fight inflation.</li><li>Jet fuel costs are expected to average US$98.50/barrel in 2023 for a total fuel bill of US$215 billion.</li></ul>

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