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Airlines Industry is Likely to Revive Lost Glory in 2023
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The global airlines industry is set to revive its lost glory in 2023. The industry suffered a massive hit from early 2020 to mid-2022, due to pandemic-induced travel restrictions and lockdowns. However, as the United States and most countries globally removed air travel restrictions buoyed by the gradual fading out of coronavirus infections, the airlines industry is gaining its foothold.
The pent-up demand is driving traffic for airlines. Despite inflationary pressures and supply-chain woes, there is a wave of optimism surrounding air-travel demand. The buoyant scenario with respect to air-travel demand is expected to improve further in 2023.
IATA's Bullish Forecast
In December 2022, the International Air Transport Association (IATA) estimated that the net profits for airlines across the globe are likely to be $4.7 billion in 2023. The top line in 2023 is anticipated at $779 billion compared with the previous estimate of $727 billion.
Per IATA, passenger revenues in 2023 are anticipated to be $522 billion (85.5% of 2019 [pre-coronavirus] levels) despite economic uncertainties. Cargo revenues are expected to be around $150 billion, suggesting an increase of nearly $48.6 billion from the pre-pandemic level of 2019.
Positive Developments
Major airlines like American Airlines Group Inc. (AAL - Free Report) , Delta Air Lines Inc. (DAL - Free Report) and United Airlines Holdings Inc. (UAL - Free Report) reported better-than-expected earnings results with strong guidance for the near term. Improved air travel demand was the primary reasons for the upbeat guidance.
Alaska Air Group Inc. (ALK - Free Report) too is being aided by the buoyant air-travel-demand. On the back of upbeat air-travel demand and favorable pricing. ALK expects first-quarter 2023 total revenues to increase 29-32% year over year.
JetBlue Airways Corp. (JBLU - Free Report) has partnered CHOOOSE to create a new online platform, which allows passengers to estimate the amount of carbon dioxide emissions from flights. To stop these harmful emissions, passengers can make financial contributions to fund the usage of environmentally-friendly sustainable aviation fuel (SAF) on JetBlue flights.
Owing to its environmentally-friendly attitude, AAL has improved its fuel efficiency by more than 10% since 2013, in turn saving 1.9 billion gallons of fuel and preventing 19 million metric tons of carbon dioxide. AAL used 2 million gallons of SAF in 2022, thereby doubling its usage year over year.
Moreover, the airlines industry suffered last year due to higher crude oil prices that were triggered primarily by the prolonged war between Russia and Ukraine. However, oil prices, the major source of costs for airlines, retreated by nearly 30% from the March-April peak of last year.
Finally, China’s recent reopening and removal of all travel-related restrictions after a long COVID-19 lockdowns will benefit the airlines industry. The resilient demand will allow several debt-ridden companies to fix their balance sheets.
Bottom Line
Air-travel demand made a stronger-than-expected recovery as people are again booking flights, thereby boosting passenger revenues, which account for the bulk of most airlines' top lines. The focus on boosting cargo revenues is an added positive. The well-being of companies in this industry is linked to the health of the overall economy.
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Airlines Industry is Likely to Revive Lost Glory in 2023
The global airlines industry is set to revive its lost glory in 2023. The industry suffered a massive hit from early 2020 to mid-2022, due to pandemic-induced travel restrictions and lockdowns. However, as the United States and most countries globally removed air travel restrictions buoyed by the gradual fading out of coronavirus infections, the airlines industry is gaining its foothold.
The pent-up demand is driving traffic for airlines. Despite inflationary pressures and supply-chain woes, there is a wave of optimism surrounding air-travel demand. The buoyant scenario with respect to air-travel demand is expected to improve further in 2023.
IATA's Bullish Forecast
In December 2022, the International Air Transport Association (IATA) estimated that the net profits for airlines across the globe are likely to be $4.7 billion in 2023. The top line in 2023 is anticipated at $779 billion compared with the previous estimate of $727 billion.
Per IATA, passenger revenues in 2023 are anticipated to be $522 billion (85.5% of 2019 [pre-coronavirus] levels) despite economic uncertainties. Cargo revenues are expected to be around $150 billion, suggesting an increase of nearly $48.6 billion from the pre-pandemic level of 2019.
Positive Developments
Major airlines like American Airlines Group Inc. (AAL - Free Report) , Delta Air Lines Inc. (DAL - Free Report) and United Airlines Holdings Inc. (UAL - Free Report) reported better-than-expected earnings results with strong guidance for the near term. Improved air travel demand was the primary reasons for the upbeat guidance.
Alaska Air Group Inc. (ALK - Free Report) too is being aided by the buoyant air-travel-demand. On the back of upbeat air-travel demand and favorable pricing. ALK expects first-quarter 2023 total revenues to increase 29-32% year over year.
JetBlue Airways Corp. (JBLU - Free Report) has partnered CHOOOSE to create a new online platform, which allows passengers to estimate the amount of carbon dioxide emissions from flights. To stop these harmful emissions, passengers can make financial contributions to fund the usage of environmentally-friendly sustainable aviation fuel (SAF) on JetBlue flights.
Owing to its environmentally-friendly attitude, AAL has improved its fuel efficiency by more than 10% since 2013, in turn saving 1.9 billion gallons of fuel and preventing 19 million metric tons of carbon dioxide. AAL used 2 million gallons of SAF in 2022, thereby doubling its usage year over year.
Moreover, the airlines industry suffered last year due to higher crude oil prices that were triggered primarily by the prolonged war between Russia and Ukraine. However, oil prices, the major source of costs for airlines, retreated by nearly 30% from the March-April peak of last year.
Finally, China’s recent reopening and removal of all travel-related restrictions after a long COVID-19 lockdowns will benefit the airlines industry. The resilient demand will allow several debt-ridden companies to fix their balance sheets.
Bottom Line
Air-travel demand made a stronger-than-expected recovery as people are again booking flights, thereby boosting passenger revenues, which account for the bulk of most airlines' top lines. The focus on boosting cargo revenues is an added positive. The well-being of companies in this industry is linked to the health of the overall economy.
Image Source: Zacks Investment Research