The International Air Transport Association (IATA) expects industry earnings of $9.8 billion this year thanks to strong travel demand and a decline in oil prices, but warns that profit margins are not sustainable.
The world’s airlines saw their industry come to an almost complete halt when the spread of Covid-19 forced the closure of borders in early 2020. But that story seems to be behind us, according to the union that brings them together.
IATA doubled its industry earnings forecast for this year, from nearly $4.7 billion in December, buoyed by strong travel demand and a decline in oil prices.
It also expects revenue to rise to $803 billion, gradually approaching the pre-pandemic level of $838 billion a year. However, the union warns about the low profit margins.
“In simple terms, (the net margin is) about $2.25 per passenger, which is less than the price of a cup of coffee or a subway ticket,” said Willie Walsh, IATA’s director general.
In the framework of the annual conference that brings together some 300 airlines in Istanbul, Turkey, the executive acknowledged that the margin, however, is much better than the loss of $76 per passenger reported by airlines in 2020.
Global tariff hike
Rising demand, as well as shortages of aircraft, parts and labor, have contributed to rising airfares since the pandemic, IATA said, though it suggested those same issues may slow down the post-pandemic recovery.
The industry claims that worldwide rates have also risen due to additional taxes and fees that have added 33% to prices.
Despite the rise in prices, in Latin America airlines as a whole are expected to lose 1.4 billion dollars –despite the solid profits of some–, with demand 2% lower than in the pre-pandemic stage.
With EFE and Reuters
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