Cargo markets are expected to come under intense pressure in the New Year as revenues drop. As belly capacity grows in line with recovery in passenger markets, yields are expected to take step back. IATA expects a fall of 22.6% in cargo yields in latter part of this year.
CT Bureau
The International Air Transport Association (IATA) expects a return to profitability for the global airline/air cargo industry in 2023 as airlines continue to cut losses stemming from the effects of the COVID to their business in 2022. Air cargo revenues played an important role in cutting losses with revenues expected to reach US$201.4 billion. That is an improvement as compared with the June forecast, which is largely unchanged from 2021, and more than double the US$100.8 billion earned in the year 2019.
In 2023, the airlines are expected to post a small net profit of US$4.7 billion—about 0.6 per cent net profit margin. It is the first profit ever since COVID struck when industry profits were US$26.4 billion (3.1 per cent net profit margin). In 2022, airline net losses are expected to be US$6.9 billion (an improvement on the US$9.7 billion loss for 2022 in IATA’s June outlook). This is better than losses of US$42.0 billion and US$137.7 billion that were realized in 2021 and 2020, respectively.
“Resilience has been the hallmark for the airlines in the COVID crisis. As we look to 2023, the financial recovery will take shape with a first industry profit since 2019. That is an achievement considering the scale of the financial and economic damage caused by government imposed pandemic curbs. But a US$4.7 billion profit on industry revenues of US$779 billion also illustrates that there is much more ground to cover to put the global industry on a solid financial footing.
“Many airlines are sufficiently profitable to attract the capital needed to drive the industry forward as it decarbonizes. But many others are struggling for a variety of reasons. These include onerous regulation, high costs, inconsistent government policies, inefficient infrastructure, and a value chain where the rewards of connecting the world are not equitably distributed,” said Willie Walsh, Director General, IATA.
Drop in cargo revenues
Cargo markets are likely to come under increased pressure in 2023. Revenues are expected to be US$149.4 billion, US$52 billion less than 2022, but still US$48.6 billion more than 2019. “With economic uncertainty, cargo volumes are expected to decrease to 57.7 million tons from a peak of 65.6 million tons in 2021. As belly capacity grows in line with the recovery in passenger markets, yields are expected to take a significant step back. IATA expects a fall of 22.6 per cent in cargo yields, mostly in the latter part of the year when the impact of inflation-cooling measures is likely to bite. To put the yield decline in context, cargo yields grew by 52.5 per cent in 2020, 24.2 per cent in 2021 and 7.2 per cent in 2022. Even the sizable and expected decline leaves cargo yields well-above COVID.”
Optimism this year
This year, the airline industry is expected to tip into profitability. Airlines are anticipated to earn a global net profit of US$4.7 billion on revenues of US$779 billion (0.6 per cent net margin). This expected improvement comes despite growing economic uncertainties as global Gross Domestic Product (GDP) growth slows to 1.3 per cent from 2.9 per cent in 2022.
“Despite the economic uncertainties, there are plenty of reasons to be optimistic about 2023. Lower oil price inflation and continuing pent-up demand should assist in keeping costs in check as the strong increasing trend continues. At the same time, with such thin margins, even an insignificant shift in any one of these variables has the potential to shift the balance into negative territory. Vigilance and flexibility will be key,” said Walsh.
Implications for cargo
Cargo markets are expected to come under increased pressure in 2023. Revenues are expected to be US$149.4 billion, which is US$52 billion less than 2022, but still US$48.6 billion stronger than 2019. With economic uncertainty, cargo volumes are expected to decrease to 57.7 million tons, from a peak of 65.6 million tons in 2021. As belly capacity grows in line with the recovery in passenger markets, yields are expected to take a significant step back.
IATA expects a fall of 22.6 per cent in cargo yields, mostly in the latter part of the year when the impact of inflation-cooling measures is expected to bite. To put the yield decline in context, cargo yields grew by 52.5 per cent in 2020, 24.2 per cent in 2021 and 7.2 per cent in 2022. Even the sizable and expected decline leaves cargo yields well-above pre-COVID levels.
