North American airlines are forecast to earn a $9.9 billion profit in 2022, a major improvement from a projected $5.5 billion loss in 2021.
According to the industry organization, which is hosting its annual general meeting this week in Boston, the rebound will be fueled mostly by robust demand for domestic flights in the United States, and North America will be the only region in the positive financial territory next year. “We are well over the crisis’s darkest point,” IATA general director Willie Walsh said.
“The road to recovery is becoming clear. “Aviation is displaying its resilience once more,” he added while emphasizing that “serious difficulties remain.”
These challenges include the slow recovery of foreign demand and the large amount of debt accumulated by airlines in order to survive the pandemic. “During the crisis, financial assistance was a lifeline for many airlines. A large portion of that, around $110 billion, is in the form of support that must be repaid.
When combined with commercial financing, the business has become excessively leveraged, according to Walsh. Airlines do not seek subsidies, he claims, but salary assistance measures “to maintain vital skills” may be required for some airlines until governments authorize large-scale international travel. He also proposed that slot wavers should be extended “far into 2022.”
He stated that he would consider it normal for airlines to return slots if passengers elected not to fly. However, he stated that “they want to fly; they are stopped from flying [due to government-imposed restrictions], thus their slots should not be jeopardized.”
He criticized the ongoing limits, uncertainty, and complexity of cross-border travel, claiming that “losses continue to be driven by government travel restrictions, not by the virus.”
International demand, measured in revenue passenger kilometers, is predicted to be just 22% of pre-crisis levels in 2019 and 44% of pre-crisis levels the following year. Domestic demand, on the other hand, is expected to recover to 73 percent of 2019 levels this year and 93 percent next year, according to IATA.
Global demand is expected to reach 40% of pre-crisis levels in 2021, according to IATA. Capacity, defined in available seat kilometers, will most certainly rise faster than demand, reaching 50% of pre-crisis levels by 2021. This will result in an average passenger load factor of only 67.1 percent, the lowest since 1994. The passenger load factor is expected to rise to 75.1 percent next year.
While airlines’ financial performance in 2022 could be better than in 2021, their profitability in 2021 appears to be worse than previously estimated. IATA now forecasts that net industry losses will exceed $51.8 billion, an increase from the $47.7 billion loss forecasted in April.
Furthermore, net 2020 loss estimates have been raised from $126.4 billion to $137.7 billion. Adding these losses together, overall industry losses in 2020-2022 are predicted to reach a mind-boggling $201 billion. “The scale of the COVID-19 crisis for airlines is enormous,” Walsh stated.
Walsh chastised airports and air navigation service providers for “shoring up” their finances by recouping lost income from airline customers. “A $2.3 billion increase in charges amid this crisis is unconscionable,” he remarked. “We all want to put Covid-19 in the past.
However, putting the financial burden of an apocalyptic crisis on the backs of your clients just because you can is a marketing plan that only a monopoly could devise.” He said that IATA would battle price gauging, assuring AIN that the trade association will do “everything it can to fight these intolerable increases in prices.”