Planes, the companies will return to profit in 2023. And flying will cost even more – Corriere.it

Airlines are preparing to end the pandemic and return to profits for the first time since 2019. But those expecting a drop in fares will be disappointed because there is no reduction on the horizon. In the next twelve months, the carriers expect to earn 4.7 billion dollars compared to 779 billion dollars in revenues between passenger and cargo transportation. This is what emerges from the estimates of Iata, the main international association of airlines, which also expects the return on board of 4.2 billion passengers, figures very close to the 4.5 billion pre-Covid.

“One Dollar Earnings Per Traveller”

The forecasted 2023 profit comes after three years in which airlines collectively lost $186.7 billion, or $11.3 per traveler carried. Next year, per customer, that will be just $1.11 in profit. “In short, the airlines will earn less than the cost of a coffee,” comments Willie Walsh, number one of IATA, at the association’s headquarters in Geneva, Switzerland. “But after three years of massive losses, I’d say even a small profit is good news.”

The jump in passenger revenues

2022, calculates the Iata, will close with net losses of 6.9 billion dollars (with 727 billion in revenues), even if the figure hides the numbers of the North American market which are already positive again, while Asia — especially for China’s shutdown — it’s at the bottom of the recovery. In 2023, out of 779 billion in revenues, 522 billion are attributable to passenger transport, 149.4 billion to cargo and 107.6 billion to “ancillary” revenue. All of this, obviously, net of other global events such as a new pandemic wave, new restrictions, an expansion of the conflict in Ukraine or the recession.

In the macro-areas

But as in 2022, North America will also drive the sector in 2023 with 11.4 billion in expected profits. Followed by Europe (+600 million dollars) and the Middle East (+300 million). Yet another negative year for the rest of the world, from -200 million in Africa to -800 million in Latin America and -6.6 billion in Asia-Pacific, largely due to the restrictions still in place in China. «2022 was a positive year overall and we are optimistic about the future», reasons Walsh. «The recovery is strong, with the exception of China. We are still below 2019 in terms of international connections, but on domestic flights we have already returned to pre-pandemic values”. Even if inflation is worrying, “economic growth remains positive”, continues the number one of Iata.

The impact of kerosene

The cost of oil will also remain high in 2023, predicts Marie Owens Thomsen, chief economist of IATA, with a barrel of kerosene expected at 111.9 dollars. “Next year, carriers’ energy bills will be $229 billion, or 30% of their operating expenses.” The war in Ukraine adds further tension also because the closure of Russian airspace by European carriers has forced them to redo the routes to and from Asia, adding at least an hour of flight time and therefore higher costs.

The effect on tickets

This is why rates will not drop in 2023 either. “Prices go up because the cost of fuel goes up,” Walsh says. «If we look at the correlation between revenues and costs from 2000 onwards, it is 0.934, very close to 1. It means that when costs go up, tariffs go up too », he continues. “You can’t expect the industry to absorb the kerosene price increase when it’s making a $1.1 profit per passenger carried,” he stresses. “That’s why if the price of oil goes up the tickets must go up too”. In Europe it could even be worse than elsewhere. “If we also include the costs for decarbonisation and the increase in airport and air traffic management expenses in the Old Continent, then flying will cost even more”.