Airline industry profitability ‘on the horizon’ in 2023

The latest airline industry forecasts provide positive signals about the rate of recovery in the global market.

The International Air Transport Association (IATA) this week upgraded its outlook for the airline industry’s financial performance in 2022 as the pace of recovery from the COVID-19 crisis quickens. The airlines association also said that the industry could return to profit in 2023, led by the fast-growing US market.

Forecast highlights include:

  • Industry losses are expected to reduce to US$9.7 billion (improved from the October 2021 forecast for an US$11.6 billion loss) for a net loss margin of -1.2%. That is an improvement from losses of US$137.7 billion (-36% net margin) in 2020 and US$42.1 billion (-8.3% net margin) in 2021.
  • Industry-wide profitability in 2023 appears within reach, said IATA, with North America already expected to deliver an US$8.8 billion profit in 2022.
  • Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fuelling a resurgence in demand that will see passenger numbers reach 83% of pre-pandemic levels in 2022.

IATA Director General Willie Walsh said: “Airlines are resilient. People are flying in ever greater numbers. Losses will be cut to US$9.7 billion this year and profitability is on the horizon for 2023. It is a time for optimism, even if there are still challenges on costs, particularly fuel, and some lingering restrictions in a few key markets.” The challenge for the sector is to keep costs under control in 2022, said IATA. Walsh noted: “The reduction in losses is the result of hard work to keep costs under control as the industry ramps up. The improvement in the financial outlook comes from holding costs to a +44% increase while revenues increased +55%. As the industry returns to more normal levels of production and with high fuel costs likely to stay for a while, profitability will depend on continued cost control. And that encompasses the value chain. Our suppliers, including airports and air navigation service providers, need to be as focused on controlling costs as their customers to support the industry’s recovery.”


Industry revenues are expected to reach US$782 billion (+54.5% on 2021), 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8 million, which is 86.9% of 2019 levels (38.9 million flights). Scheduled passenger numbers are expected to reach 3.8 billion, with revenue passenger kilometres (RPKs) growing 97.6% compared with 2021, reaching 82.4% of 2019 traffic. As pent-up demand is released with the easing of travel restrictions, yields are expected to rise 5.6%. That follows a yield evolution of -9.1% in 2020 and +3.8% in 2021.


Overall expenses are expected to rise to US$796 billion. That is a 44% increase on 2021, which reflects both the costs of supporting larger operations and the cost of inflation in some key items. At US$192 billion, fuel is the industry’s largest cost item in 2022 (24% of overall costs, up from 19% in 2021). Airlines are expected to consume 321billion litres of fuel in 2022 compared with the 359 billion litres consumed in 2019. Labour is the second highest operational cost item for airlines. Direct employment in the sector is expected to reach 2.7 million, up +4.3% on 2021 as the industry rebuilds from the significant decline in activity in 2020. Employment is still below the 2.93 million jobs in 2019 and is expected to remain below this level for some time. In countries where the economic recovery from the pandemic has been swift and the unemployment rate is low, tight labour markets and skill shortages are likely to contribute to upward pressure on wages. The industry’s wage bill is expected to reach US$173 billion in 2022, up +7.9% on 2021, and disproportionate to the 4.3% increase in total jobs.

Industry recovery remains uneven

Domestic RPKs pause, International RPKs accelerate

Source: IATA Economics.

Macro-Economic Factors

The global macroeconomic backdrop is critical for the industry outlook. The forecast incorporates an assumption for solid global GDP growth of +3.4% in 2022, down from the strong +5.8% rebound last year. Inflation has risen and is expected to remain elevated throughout 2022, waning over the course of 2023. While nominal interest rates are rising, real interest rates are expected to remain low or negative for a sustained period.

War in Ukraine

The outlook assumes that the war in Ukraine will not escalate beyond its borders. Among the many negative impacts of an escalation for aviation, rising fuel costs and a dampening demand due to lowered consumer sentiment would be key. Combined, the Russian international market, Ukraine, Belarus, and Moldova accounted for 2.3% of global traffic in 2021. In addition, about 7% of international passenger traffic (RPK) would normally transit Russian airspace (2021 data), which is now closed to many operators, mostly on long-haul routes between Asia and Europe or North America. There are significantly higher costs for re-routing for those carriers affected, IATA said.

More belly capacity with strong passenger traffic

Long-term passenger forecast, billion passengers and % of 2019 level

Source: IATA Economics/Tourism Economics – 20-year Passenger Forecast –May 2022 update.

Inflation, Interest Rates and Exchange Rates

Interest rates are rising as central banks combat inflation. Aside from those carrying debt (who will see inflation devaluing their debts), inflation has the economic dampening effect of a tax by reducing purchasing power, IATA noted. There is downside risk to this outlook should inflation continue to rise, and central banks continue to hike interest rates.

Also, the record strength of the US Dollar, if it continues, will have a negative impact as a strong US Dollar is growth dampening in general. It increases the local-currency price of all USD-denominated debt, and adds to the burden of paying for USD-denominated fuel imports as well.


IATA said that government responses to COVID-19 ignored World Health Organization advice that border closures are not an effective means of controlling the spread of a virus. The outlook assumes that strong and growing population immunity to COVID-19 means there will not be a repeat of these “policy mistakes”. There is, however, downside risk should governments return to “knee-jerk border-closing responses” to future outbreaks.

“Governments must have learned their lessons from the COVID-19 crisis. Border closures create economic pain but deliver little in terms of controlling the spread of the virus. With high levels of population immunity, advanced treatment methods, and surveillance procedures, the risks of COVID-19 can be managed. At present, there are no circumstances where the human and economic costs of further COVID-19 border closures could be justified,” said Walsh.

North America returns to profitability in 2022

But financial performance is improving in all regions

Net profit margin (% revenue)

Source: IATA Economics


China’s domestic market alone accounted for about 10% of global traffic in 2019. This outlook assumes a gradual easing of COVID-19 restrictions in the second half of 2022. An earlier move away from China’s zero COVID policy would improve the outlook for the industry. A prolonged implementation of the COVID-19 policy will continue to depress the world’s second largest domestic market and “wreak havoc with global supply chains” according to IATA.

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The Moodie Davitt eZine Issue 312 | 22 June 2022

The Moodie Davitt eZine is published 14 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit and to subscribe, please e-mail

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