Liftoff: Airline Industry Returns to Profits in 2023

Having largely left behind Covid-related turbulences, the global airline industry emerged from the storm in 2023, returning to profitability after three years of deep losses. According to the International Air Transport Association (IATA), commercial airlines are expected to end the year with $23.3 billion in net profit, up from a loss of $3.8 billion in 2022 and significantly higher than previously expected. Back in December of last year, IATA had predicted 2023 profits to be "razor thin", projecting just $4.7 billion in industry-wide net income.

While IATA's Director General Willie Walsh hailed the industry's resilience and the extraordinary speed of recovery, he also pointed out that the pandemic cost aviation about four years of growth and that profit margins remain unsustainably thin. "Industry profits must be put into proper perspective. While the recovery is impressive, a net profit margin of 2.7% is far below what investors in almost any other industry would accept," he said. "There is something to be learned from the fact that, on average airlines will retain just $5.45 for every passenger carried. That’s about enough to buy a basic ‘grande latte’ at a London Starbucks. But it is far too little to build a future that is resilient to shocks for a critical global industry."

Looking ahead, the IATA expects industry revenues to reach a historic high of $964 billion in 2024, as 40.1 million flights are expected for the year, exceeding pre-pandemic, i.e. 2019 supply by 1.2 million flights. Passenger revenue is expected to reach $717 billion next year, exceeding the 2019 total by 18 percent, driven in part by an increase in in passenger volume and in part by improvements in passenger yields. Despite the improved outlook, IATA director Walsh finds his industry in a difficult position. "Airlines will always compete ferociously for their customers, but they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies,” he concludes, pointing out that the airline industry directly supports 3.05 million jobs worldwide.