Buoyed up by this year’s re-opening of international routes, long-haul flights in particular, net losses in Middle East’s airline industry are expected to narrow to $1.9bn in 2022, from a $4.7bn loss in 2021.
The demand calculated on revenue passenger kilometres (RPKs) is expected to reach 79.1% of pre-crisis (2019) levels, and capacity 80.5%, the International Air Transport Association (IATA) said in its industry outlook released here on Monday.
IATA also announced an upgrade to its outlook for the airline industry’s 2022 financial performance as the pace of recovery from the Covid-19 crisis quickens.
Globally, industry losses are expected to reduce to $9.7bn (improved from the October 2021 forecast for an $11.6bn loss) for a net loss margin of -1.2%.
That is a huge improvement from losses of $137.7bn (-36% net margin) in 2020 and $42.1bn (-8.3% net margin) in 2021.
Industry revenues are expected to reach $782bn (+54.5% on 2021), 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8mn, which is 86.9% of 2019 levels (38.9mn flights).
Passenger revenues are expected to account for $498bn of industry revenues, more than double the $239bn generated in 2021. Scheduled passenger numbers are expected to reach 3.8bn, 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.
Cargo revenues are expected to account for $191bn of industry revenues. That is down slightly from the $204bn recorded in 2021, but nearly double the $100bn achieved in 2019.
Overall, the industry is expected to carry over 68mn tonnes of cargo in 2022, which is a record high. As the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021. That only partially reverses the yield increases of 52.5% in 2020 and 24.2% in 2021.
Overall expenses are expected to rise to $796bn. 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.
Fuel: At $192bn, fuel is the industry’s largest cost item in 2022 (24% of overall costs, up from 19% in 2021). This is based on an expected average price for Brent crude of $101.2/barrel and $125.5 for jet kerosene.
Airlines are expected to consume 321bn litres of fuel in 2022 compared with the 359bn litres consumed in 2019.
War in Ukraine is keeping prices for Brent crude oil high, IATA noted.
Nonetheless, fuel will account for about a quarter of costs in 2022. A particular feature of this year’s fuel market is the high spread between crude and jet fuel prices.
This jet crack spread remains well above historical norms, mostly owing to capacity constraints at refineries. Under-investments in this area could mean that the spread remains elevated into 2023.
At the same time, high oil and fuel prices are likely to see airlines improve their fuel efficiency — both through the use of more efficient aircraft and through operational decisions.
IATA’s Director General Willie Walsh said, “Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty.
“Losses will be cut to $9.7bn 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.”
He said revenues are rising as Covid-19 restrictions ease and people return to travel. The challenge for 2022 is to keep costs under control.
“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,” Walsh added.
The demand calculated on revenue passenger kilometres (RPKs) is expected to reach 79.1% of pre-crisis (2019) levels, and capacity 80.5%, the International Air Transport Association (IATA) said in its industry outlook released here on Monday.
IATA also announced an upgrade to its outlook for the airline industry’s 2022 financial performance as the pace of recovery from the Covid-19 crisis quickens.
Globally, industry losses are expected to reduce to $9.7bn (improved from the October 2021 forecast for an $11.6bn loss) for a net loss margin of -1.2%.
That is a huge improvement from losses of $137.7bn (-36% net margin) in 2020 and $42.1bn (-8.3% net margin) in 2021.
Industry revenues are expected to reach $782bn (+54.5% on 2021), 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8mn, which is 86.9% of 2019 levels (38.9mn flights).
Passenger revenues are expected to account for $498bn of industry revenues, more than double the $239bn generated in 2021. Scheduled passenger numbers are expected to reach 3.8bn, 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.
Cargo revenues are expected to account for $191bn of industry revenues. That is down slightly from the $204bn recorded in 2021, but nearly double the $100bn achieved in 2019.
Overall, the industry is expected to carry over 68mn tonnes of cargo in 2022, which is a record high. As the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021. That only partially reverses the yield increases of 52.5% in 2020 and 24.2% in 2021.
Overall expenses are expected to rise to $796bn. 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.
Fuel: At $192bn, fuel is the industry’s largest cost item in 2022 (24% of overall costs, up from 19% in 2021). This is based on an expected average price for Brent crude of $101.2/barrel and $125.5 for jet kerosene.
Airlines are expected to consume 321bn litres of fuel in 2022 compared with the 359bn litres consumed in 2019.
War in Ukraine is keeping prices for Brent crude oil high, IATA noted.
Nonetheless, fuel will account for about a quarter of costs in 2022. A particular feature of this year’s fuel market is the high spread between crude and jet fuel prices.
This jet crack spread remains well above historical norms, mostly owing to capacity constraints at refineries. Under-investments in this area could mean that the spread remains elevated into 2023.
At the same time, high oil and fuel prices are likely to see airlines improve their fuel efficiency — both through the use of more efficient aircraft and through operational decisions.
IATA’s Director General Willie Walsh said, “Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty.
“Losses will be cut to $9.7bn 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.”
He said revenues are rising as Covid-19 restrictions ease and people return to travel. The challenge for 2022 is to keep costs under control.
“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,” Walsh added.