“Phenomenal” Industry Turnaround in 2022, Profits Possible in 2023
The expected industry net loss of $9.7 billion this year is “a phenomenal result even if it’s still in the red,” given the historic challenges the industry has faced since 2020, IATA Chief Economist Marie Owens Thomsen told the IATA AGM. Thomsen also said the industry could return to the black in 2023 while airlines in North America are expected to post profits this year, driven by the strong performance of the US domestic market.
At the same time, the industry faces strong headwinds, including a slowing economy with global GDP growth expected to rise just 3.4% this year, down from 6% in 2021. Soaring oil prices are also a challenge, although she noted that higher oil prices “don’t necessarily spell recession.” Thomsen added that the risk of recession is increasing, but she still characterized it as low. Although inflation has already exceeded economists’ expectations, enormous pent-up demand for travel also means that there is a “certain insensitivity” to prices this year. Global debt levels are also at historical highs, which she said “are not sustainable, but could be affordable” owing to inflation, which reduces the real cost of borrowing. Nevertheless,
In terms of long-term impacts from the near shutdown of international aviation in 2020-21, Thomsen said that although global traffic levels are expected to return to 2019 levels by 2024, traffic in 2040 will be 6% lower than the pre-pandemic forecast. In that sense, the pandemic cost and governments’ response removed nearly two years of traffic growth. But the industry is resilient, she said, citing, “the whack a mole effect”: “you hit [aviation] on the head and it just bounces back.”