Airlines to return to profit next year, says IATA in industry update

AFTER 2 years of unprecedented pain brought on by the Covid-19 pandemic, the airline industry should return to profitable times next year as pent-up demand for travel sustains bookings, the International Air Transport Association (IATA) said on Monday (Jun 20).

The announcement came at the 78th annual general meeting of the body in Doha. Speaking at the event, its director-general Willie Walsh said airlines have emerged "leaner, tougher and nimbler", having defied predictions for widespread bankruptcies and failures.

"Industry-wide profit should be on the horizon in 2023," he told the gathering of airline chiefs. "We are rebounding. By next year, most markets should see traffic reach or exceed pre-pandemic levels."

He also said in an interview on the sidelines of the meeting that airlines would be able to sustain their rebound from the coronavirus crisis even with a global economic slowdown. A recovery in demand unleashed with the removal of travel curbs should continue, regardless of financial pressures on consumers, he said. "We're facing some challenges. But actually the outlook remains very, very positive. All the research we're doing reaffirms that people want to get back flying," he said.

As carriers emerge from the pandemic, they're facing critical labour shortages, elevated fuel prices and intensifying pressure to reduce emissions - but they're also enjoying bumper sales as customers flood back following the lifting of Covid-19 curbs, taking leisure trips and catching up with friends and family.

Qantas Qantas Airways' chief executive officer Alan Joyce said corporate demand at the Australian carrier is almost fully recovered, and international capacity should return to pre-Covid levels by the second quarter of 2023. Meanwhile, Air India is said to be considering a huge plane order as it overhauls its fleet under new ownership.

The plane-maker is seeing record demand from airlines to replace aircraft, its CEO Guillaume Faury said in a television interview. While demand for narrow-body jets will exceed supply in most scenarios, that's not yet the situation for wide-body jets because international travel hasn't fully recovered, he said.

Walsh said that while "there is no way to sugar coat the bitter economic and political realities" at the same time, "the desire to travel and the necessity of moving goods are both solid".

Losses this year are likely to total US$9.7 billion, IATA said, an improvement on the US$11.6 billion deficit predicted at the previous gathering last October. IATA also said that 2021's loss amounted to US$42 billion, better than the US$52 billion shortfall previously envisioned.

Airbus and Qantas plan to invest as much as US$200 million to kick-start Australia's sustainable aviation fuel (SAF) industry.

The partners will make equal investments in the project, with a smaller contribution from Raytheon Technologies Corp's Pratt & Whitney arm, whose engines Qantas selected for a recent Airbus plane order. The firms could ultimately also take equity stakes in SAF ventures that are deemed viable.

Malaysia Airlines Malaysia Airlines is in discussions about the replacement of its Airbus A330s, said the carrier's chief executive officer, Izham Ismail. Most of the aircraft being ordered to replace the A330s would be leased as the airline looks to keep its balance sheet lean, he said in an interview on the sidelines of the IATA meeting.

The company is in conversations with "interested parties" for its A380s, an aircraft that now doesn't feature in its fleet plans, Ismail said. The carrier will only consider expansion after 2024.

Airbus The delayed arrival of aircraft engines is keeping Airbus from delivering some planes to customers as supply-chain problems weigh on the manufacturer's recovery from the coronavirus crisis despite strong demand, said its CEO Guillaume Faury said in an interview.

Twenty narrow-body jets that were fully built by the end of May were still missing engines, which will lead to late deliveries. Faury said that aside from the engine delays, overall supply-chain challenges appear to have stabilised. Airbus plans to ramp up monthly output of its A320 series by 50 per cent, and sees strong demand in coming years. 

Air India Air India is considering ordering as many as 300 narrow-body jets, said sources in what could be one of the largest orders in commercial aviation history as the formerly state-run airline looks to overhaul its fleet under new ownership.

The carrier may order Airbus SE's A320neo family jets or Boeing's 737 Max models, or a mix of both, the people said, asking not to be identified because the discussions are confidential. A deal for 300 737 Max-10 jets could be worth US$40.5 billion at sticker prices, although discounts are common in such large purchases, and likely take years or even decades to deliver. BLOOMBERG

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