European airlines are anticipated to make much higher profits in 2023 than previously forecast, as the industry benefits from continuing “high demand” for travel.
According to the latest financial update from the airline association IATA, European carriers are collectively forecast to increase net profit by around $1 billion this year to $5.1 billion, compared with a profit of $4.1 billion achieved in 2022.
IATA said European airlines were expected to enjoy a 19.6 percent year-on-year rise in demand this year, as measured by revenue passenger kilometers (RPKs), which would also just be 6 percent lower than 2019 levels.
Capacity in Europe, as measured by ASKs (available seat kilometers), is up by 18.8 percent year-on-year compared with 2022 and only 2 percent lower than in the pre-Covid year.
“Notwithstanding the various capacity constraints experienced over the summer period, European carriers were able to return to profit in 2022,” said IATA in its report. “That profitability will strengthen further in 2023. The key regional risks relate to the war in Ukraine, labour unrest, and concerns about economic performance in some key countries.”
The global picture for airlines has also improved hugely since IATA’s previous financial update in December. At that time, the association was predicting a net profit of $4.7 billion in 2023 for the entire industry, but that estimate has now more than doubled to $9.8 billion with a profit margin of 1.2 percent.
IATA added that it expected 4.35 billion people to fly during 2023, a figure which is “closing in” on 2019’s traffic figure of 4.54 billion
Willie Walsh, director general of IATA, said: “Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments. China lifted Covid-19 restrictions earlier in the year than anticipated. Jet fuel prices, although still high, have moderated over the first half of the year.”
“Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep Covid-19 losses, even a net profit margin of 1.2 percent is something to celebrate.
“But with airlines just making $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines.”
IATA said that the outlook for airline financial performance remained “diverse” across various regions, although there had been improvement in all regions from the “depths” experienced in 2020 at the height of the pandemic. The industry is expected to remain loss-making in several regions, including Asia Pacific, Latin America, and Africa in 2023.