After two very difficult pandemic years marked by airport closures and dropping tourism, airline profits have rebounded, surpassing all forecasts. The industry as a whole projects a net profit of 9,800 million USD in 2023, about 9,165.45 million euros, doubling earlier estimates by the International Air Transport Association (IATA), which had forecast 4,700 million USD (4,395 million euros). At its annual summit in Istanbul, IATA stressed that aviation profitability has strengthened since 2022, when inflation and jet fuel prices rose alongside the Ukraine conflict and the costs passed to travelers increased. The association’s president, Willie Walsh, noted a global rise in ticket prices driven by higher taxes and airline fees.
Several factors lift airline financial performance, but the easing of restrictions in China has been especially reassuring for the sector, benefiting both passenger traffic and cargo. Walsh also pointed out that while market reactions are waiting for OPEC’s decision to extend oil cuts through year-end, costs have eased thanks to softer fuel prices in the first half of the year. IATA projects sector revenues to reach 803 billion USD (776,500 million EUR), up 9.7% from 2022 and down 4.1% from 2019, with operating profit exceeding 22,400 million USD (20,940 million EUR) against a prior forecast of 3,200 million USD (2,992 million EUR). It looks set to be a strong year.
There is even better news. The rebound in global tourism is a key driver for IATA’s outlook, with an estimated 4,350 million travelers anticipated this year. Airlines report nearly 4,540 million flights, a rebound from the 2019 figure, while 34.4 million flights were logged in a single period, up 24.4% from 2022 but still 11.5% below pre-pandemic levels. Based on these indicators, many airlines expect to return to profitability in 2023, though regions such as Asia-Pacific, Latin America, and Africa may still face challenges in turning a profit this year. On the cargo side, airfreight volumes are projected at 57.8 million tons, just below the 61.5 million tons moved in 2019, reflecting broader trade dynamics.
In Europe, forecasts look positive again after a disrupted 2022. Despite strikes, ongoing conflict in Ukraine, and broader economic headwinds, European airlines are expected to earn around 5,100 million USD, with passenger numbers about 6% lower and capacity roughly 2% below 2019 levels. The Middle East is projected to gain about 2 billion USD in expanded capacity, while North American carriers are anticipated to exceed pre-pandemic levels by about 2%, targeting around 11.5 billion USD in regional profits.
The Costs of Inefficiency
During his remarks, Walsh criticized airports that pin delays on airlines, pointing to Schiphol in Amsterdam as a notable example. He highlighted a three-year fare increase totaling 37%, with a further 12% rise in 2023, and cited a 1.9 billion euro cost impact on European carriers. As IATA has noted, air traffic management in 2022 significantly expanded the cost base, contributing to delays and unmet environmental and capacity targets. The IATA president advocates globally standardized measures, including verifiable digital identities, currently under development, to streamline operations.
The association also referenced more than 100 jurisdictions that have implemented traveler protections. European passenger rights rules, EU 261, were described as burdensome for airlines when disruptions occur, without fully recognizing the steep costs of not operating as planned.
Advances in Sustainability
With policy pushes toward decarbonization by 2050, the push for sustainable aviation fuel (SAF) has gained momentum. Yet production remains a major hurdle. Walsh notes that while the trend is positive and SAF production could triple to around 300 million liters in 2022, this still accounts for less than 0.1% of what is needed to reach zero emissions. Airlines have begun injecting SAF into engines, but IATA cautions that current production is insufficient to meet demand. The path forward includes increasing flight numbers and diversifying feedstocks to close the gap.