Airlines see return to profitability in 2023, conflict with airports

GENEVA (Reuters) – Global airlines are forecasting their first industry-wide profit next year since 2019 as air travel recovers from COVID-19 restrictions, while a fresh war of words erupted with airports on Tuesday over rising airfares and ground charges.

Airlines lost tens of billions of dollars in 2020 and 2021 due to the pandemic, but air travel has partially recovered and some airports have struggled to cope.

The International Air Transport Association (IATA) now expects a net profit of $4.7 billion for the industry next year when more than 4 billion passengers will fly. Previously, it had merely said gains in 2023 were “within reach.”

For 2022, IATA narrowed its forecast for industry-wide losses to $6.9 billion from $9.7 billion.

“This is a tremendous achievement given the scale of the financial and economic damage caused by government-imposed pandemic restrictions,” IATA Director General Willie Walsh said on Tuesday, referring to the projected return to profitability in 2023.

But the former British Airways and IAG boss warned many airlines will continue to struggle over the next year, citing regulations, high costs and inconsistent government guidelines – and the resumption of a longstanding dispute with airports.

“It is very important that everyone understands how fragile the recovery is. Yes, we are recovering; yes, the dynamics are improving; yes, we expect it to continue to improve in 2023,” Walsh said at an annual media briefing.

“But the margins we operate on are very tight and we cannot tolerate a situation where airports in particular are trying to take advantage of airlines and their passengers by significantly increasing airport charges. Every single cent counts.”

Airports immediately pointed fingers back at the airlines. Tensions have been high since the summer travel chaos in Europe.

“Consumers are tolerating massive increases in fares by airlines, reflecting both inflationary pressures and the fact that they tightly control the capacity they bring to market,” Olivier Jankovec, director general of airport industry association ACI Europe, told Reuters.

Airport fees reflect the same inflationary pressures, he said, adding: “So I’m asking you, who’s really hollowing out who here?”

Walsh previously defended oil-driven fare increases and warned that the switch to green fuels could push prices further up.

ADVERSE RISK

IATA projects global air traffic to return to pre-COVID or 2019 levels by 2024, led by the United States and with “notable lag” in Asia-Pacific.

IATA Chief Economist Marie Owens Thomsen warned that the risk to the sector’s latest forecasts remains “on the downside” and the “key variable” is China. Air travel is closely linked to consumer and business confidence.

Beijing has begun easing the draconian zero-COVID policy and could announce 10 new COVID-19 easing measures as early as Wednesday, two sources with knowledge of the matter told Reuters on Monday, adding to 20 unveiled in November.

If China doesn’t ease restrictions, airline profitability would be hurt. Another risk to the 2023 outlook is that some economies fall into recession, IATA said.

Walsh also lashed out at jet manufacturers who were struggling to deliver planes, blaming their supply chains.

“It causes a lot of frustration. It increases the cost base. When I talk to CEOs privately, it creates a lot of anger,” he said.

Delays have presented Airbus (AIR.PA) with a record-breaking challenge in December and its year-end delivery target could be lowered as soon as this week, Reuters reported on Friday.

On consolidation, Walsh said airlines are through the worst of the downturn, but Europe remains an area to watch.

“I think the challenge for some airlines is still there because as we’ve seen, the industry is still only marginally profitable. In fact, in Europe we can say we are breaking even,” said Walsh.

“So clearly there are still financial pressures. The difference is that airlines are now generating cash. Liquidity was the critical issue.”

Reporting by Emma Farge, Additional reporting by Tim Hepher, Editing by Louise Heavens and Bernadette Baum

Our standards: The Thomson Reuters Trust Principles.

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