Airline industry doubles its 2023 profit forecast as demand surges

Global airlines more than doubled their 2023 industry profit forecast to $9.8 billion from $4.7 billion 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," Director General Willie Walsh told the annual meeting of the International Air Transport Association (IATA) on Monday.

But profit margins, clocking in at 1.2 percent, were still too thin to ensure the industry's long-term financial robustness, he added.

Global airlines have in recent months reported strong results as they prepare for a busy summer season, with travel demand showing no sign of flagging despite peaking inflation.

Pressure from oil prices has also eased this year.

Revenue levels for 2023 are also inching closer to pre-pandemic levels, climbing to an expected $803 billion versus $838 billion in 2019.

"A lot of people not just have to travel, but want to travel. And they will continue to do so through this year," Walsh told Reuters in an interview separately.

Demand is being lifted by high levels of employment even with a weaker macroeconomic outlook, he said.

"That tends to give consumers confidence that they can spend money, that they can incur some debt to continue to enjoy what it is they're doing."

Industry challenges

Still, Walsh told delegates from some 300 airlines that ongoing challenges, such as supply chain issues and rising airport charges, were dragging down the industry's recovery.

"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," he said.

"Airlines are beyond frustrated. A solution must be found."

Cargo volumes were also still quite low compared to 2019, expected to be 57.8 million tonnes in 2023 compared to 61.5 million tonnes in 2019 due to a slowdown in global trade volumes.

Charge increases from Schiphol Airport in the Netherlands and airports in South Africa were also hampering airlines operations, he added.

"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 percent charges hike with 12 percent this year," Walsh said.

Schiphol did not immediately respond to a Reuters' request for comment.

Despite a strong rebound in demand, Walsh said, the industry's current low level of profitability was not sustainable, noting the sector was achieving a profit of about $2.25 per passenger, "which is less than the price of a cup of coffee, a subway ticket".