This semi-annual report takes a broad look at developments in the airline industry, the context in which it is operating, and the challenges it is facing.
Main takeaways:
The global long-term trends that propelled the 20th century’s unparalleled economic achievements are if not in reverse, certainly becoming less supportive. Much of the 20th century’s success was enabled by the expanded use of fossil fuels. That economic model has passed its zenith. It will take a successful energy transition to set the world on a new path towards sustained – and sustainable – growth and better economic outcomes for all.
2023 has been a year when air transportation very nearly returned to its pre-pandemic pace of activity, and a year of renewed financial profitability for the industry. In many ways, 2023 is likely to be a local sweet spot for the industry, as the same pace of growth and financial recovery is unlikely to be matched in 2024 and beyond.
Industry-wide passenger traffic, measured in revenue passenger-kilometers (RPKs), grew by 40.1% year-on-year (YoY) through September 2023 and reached 92.9% of pre-pandemic levels. All regions, except Asia Pacific, are expected to reach or surpass their 2019 traffic levels in 2023. In the long run, global passenger traffic looks set to double by 2040.
The cargo sector continued to face challenges in 2023, with a slowdown in demand due to macro-economic headwinds and a slowdown in global trade. Despite a decline in cargo tonne-kilometers (CTKs) from 2022 levels, signs of improvement emerged in the second half of 2023. Regional variations were observed, with Latin America achieving annual growth in CTKs, and North America and Africa surpassing their pre-Covid levels. Overall industry CTKs are expected to remain below 2022 levels in 2023,
with a forecast 4.5% growth in 2024.
The industry is returning to profitability in 2023, only three years after the historic loss of nearly USD 140 billion in 2020. This is a stunning performance and a testimony to the industry’s resilience, adaptability, and hard work. Total airline revenue is expected to reach 107% of 2019 earnings, with operating profits of USD 41 billion.
The net profit forecast for the whole industry this year is USD 23.3 billion. While this is a positive development, the levels of profitability are far from being exceptional. For some perspective, nearly half this amount was realized by one single oil company in just the third quarter of this year, while a large technology company nearly matched our full-year industry profits in that single quarter. Air transportation’s net profit margin is a slim 2.6% in 2023, compared to 11% and 22% for the companies just mentioned, respectively. Airlines’ profits in 2023 equate to USD 5.44 per passenger – less than a cup of cold brew coffee in Geneva. While stunningly resilient, our industry is still lacking in robustness.
Passengers around the world have clearly voted with their wallets, showing the world that they deem air transportation necessary, even in the face of record-high jet fuel prices in relation to crude oil prices. Passenger satisfaction is as high as 82% in a survey of 8,000 air travelers1, and 91% say that air transportation is necessary2. Our world needs to be connected, and air transportation is a necessary and indispensable form of connectivity. The top line development in our industry shows how important air transportation is, and the industry has been able to meet expectations, bouncing back so rapidly from a near total halt.
However, the industry remains the weakest link in the aviation value chain and the expected net profits also reveal its vulnerabilities. In the short term, airlines need to improve their profit margins and strengthen their balance sheets after the pandemic. In the longer term, ensuring air transportation’s access to renewable energy sources will allow our industry to play its full part in creating a growing global economy that is sustainable, inclusive, and equitable.
This semi-annual report takes a broad look at developments in the airline industry, the context in which it is operating, and the challenges it is facing.
Read the full report here
1 IATA 2023 Global Passenger Survey (GPS).
2 IATA Passenger Trends and Insights 2023. The IATA passenger insights survey was conducted 26 April 26-3 May 2023 with a sample of 4,700 recent travelers. It covers 11 markets (Australia, Canada, Chile, France, Germany, India, Japan, Singapore, UAE, US, and UK). Sample size in each market was 500 apart from Chile, Japan, Singapore and UAE where it was 300. This Is Motif Ltd prepared the questionnaire and analysis based on data collection and tabulation by Dynata www.thisismotif.com
