Global Aviation Industry To Turn Profitable In 2023: IATA

The global aviation industry is all set to deliver a profit of $4.7 billion in 2023, underlining a "remarkable" recovery after the Covid-19 pandemic brought air transport to a grinding halt, according to the International Air Transport Association.

The industry is likely to post a loss of $7 billion in the current year, after posting a massive loss of $138 billion in 2020, the aviation body said in its semi-annual report.

However, the recovery will be led by the North American region, which may have already turned profitable in the ongoing calendar year, while other regions may have to wait some more to see profitable operations.

The Asia Pacific region—which includes India—will have to wait till 2024 or beyond to join their ranks, the report said.

But the Asia Pacific region remains the brightest spot for the global aviation market, when it comes to future growth.

“Notwithstanding the relatively slow pace of recovery to date, we anticipate Asia Pacific will be the fastest growing region over the next two decades,” IATA said in the report, titled Global Outlook for Air Transport Sustained Recovery Amidst Strong Headwinds.

Favourable income growth and demographic factors are expected to add around 2.5 billion additional passenger journeys by 2040 in the Asia Pacific, compared with 2019, the report said. This is at an average annual rate of 4.5%, it said.

High crude oil prices after the pandemic and the Russia-Ukraine war ate into the margins of airlines across the world. IATA expects the fuel costs to come down from current levels.

“Fuel is one of the main operational cost items for an airline, typically accounting for 20-25% of the total,” the report said. “Looking forward, we expect oil prices to moderate somewhat over the forecast horizon, easing to around $92 in 2023, from around $102 this year.”

Fuel costs are estimated to account for 40% of the Indian airlines’ operational costs.

Even when the fuel prices have come down from the peak they touched earlier in the year, the challenge remains as jet fuel prices haven’t come down as much as crude oil.

“This phenomenon is related to a lack of refining capacity which creates a scarcity of jet fuel, leading to a higher price of the latter,” IATA said.

The agency sees the global refining capacity rising in the current year and next year, meaning the spread between crude oil and jet fuel are likely to have peaked, but may remain higher than the historical average.

“For airlines, this implies a lesser benefit from any crude oil-price decline compared to other industries, as the price of jet fuel will in all probability decline by less,” it said.