IATA Upbeat on Recovery, Forecasts Return to Profit in 2023

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The International Air Transport Association (IATA) has lowered its projection for industry losses for 2022 by $1.9 billion—to $9.7 billion—in spite of rising inflation and the massive increase in the price of jet fuel, which represents the largest single cost item for operators. In October last year, the airline trade body expected the industry to post an $11.6 billion loss this year. IATA also upgraded its outlook for 2023 and said industry-wide profitability next year “appears within reach,” with North America already expected to deliver an $8.8 billion profit in 2022.

“Aviation is resilient, and we are rebounding,” said IATA director general Willie Walsh in his opening address at the IATA annual general meeting in Doha, Qatar on Monday.  The industry defied predictions of bankruptcies and failures, he said, asserting it is “now leaner, tougher, and nimbler” than before the pandemic.

Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings have fueled a resurgence in demand that will see passenger numbers reach 83 percent of pre-pandemic levels in 2022. IATA expects cargo volumes to set a record high of 68.4 million tonnes in 2022.

Airlines expect to take net delivery of more than 1,200 aircraft this year, which reflects the industry optimism, Walsh asserted

But while the outlook appears positive as the desire to travel and the need to move goods remains solid, the IATA boss acknowledged the business environment continues to present a challenge.  “There is no way to sugar coat the bitter economic and political realities we face,” he said. Inflation topped 9 percent in the latest OECD [report] in April, the World Bank expects energy prices to soar 50 percent compared with 2021, and Russia’s illegal invasion of Ukraine has “destabilized globalization, threatened the world’s food supply, and recreated a geopolitical divide not seen since the Cold War,” added Walsh

“Recent history supports optimism for aviation in challenging times,” Walsh noted while downplaying any deeper impact of the post-pandemic wave of flight disruptions and airport chaos across North America and Europe owing mainly to staff shortages and the delay in staff security clearances. “We recognize that some airports, some airlines struggle to regain their capacity as demand picks up. Disruptions happen even at the best of times,” Walsh told reporters. There are no “widespread disruptions, only isolated cases…We will adjust,” he added as he criticized three airports—Heathrow, Amsterdam Schiphol, and Dublin—for planning or imposing steep charges increases while also being the airports suffering the most disruptions and delays. “This leads to question the management of these airports,” he said.

IATA regional vice president for Europe Rafael Schvartzman called on governments and airports to address capacity issues where they occur and take steps to mitigate the disruptions, cancellations, and delays affecting some parts of the European system. According to Eurocontrol data, the average delay in Europe already has reached 2019 levels despite 75 percent lower demand. For the year, on average, about 69 percent of flights suffered some sort of delay. “It is vital that airports and airlines work together to minimize disruption,” he said. “In particular, we ask our airport partners to carefully monitor the performance at key vulnerable bottlenecks. Where it’s established that capacity cannot be met, airports must make a new and realistic capacity declaration and work with slot coordinators as needed to manage the impact on planned schedules with airlines.”

All Lufthansa Group airlines have cut flights and schedules in response to the disruptions and additional cuts might still come, Lufthansa Group CEO and chairman Carsten Spohr confirmed on Monday during a roundtable with reporters.  The German subsidiary, Lufthansa, alone cut 900 flights in July. Some 10,000 passengers felt the effects last weekend. “Our ability to react is limited,” he reckoned. “We have the European slot rules and we are heavily booked,” he added, conceding that harbors “no serious hope that things will get better this summer.

“Maybe it will even get worse,” said Spohr. “We were put at zero for two years. The pick-up of demand came later than expected but it was steeper than expected.”