European airlines are expected to make much higher profits in 2023 than previously forecast, as the industry benefits from continuing ¡°high demand¡± for travel.

According to the latest financial update from airline association IATA, European carriers are collectively forecast to increase net profit by around $1 billion this year to $5.1 billion, compared with a profit of $4.1 billion achieved in 2022.?

IATA said European airlines were expected to enjoy a 19.6 per cent year-on-year rise in demand this year, as measured by revenue passenger kilometres (RPKs), which would also only be 6 per cent lower than 2019 levels.?

Capacity in Europe, as measured by ASKs (available seat kilometres), is up by 18.8 per cent year-on-year compared with 2022 and only 2 per cent lower than in the pre-Covid year.

¡°Notwithstanding the various capacity constraints experienced over the summer period, European carriers were able to return to profit in 2022,¡± said IATA in its report. ¡°That profitability will strengthen further in 2023. The key regional risks relate to the war in Ukraine, labour unrest and concerns about economic performance in some key countries.¡±

The global picture for airlines has also improved hugely since IATA¡¯s previous financial update in December. At that time, the association was predicting a net profit of $4.7 billion in 2023 for the entire industry, but that estimate has now more than doubled to $9.8 billion with a profit margin of 1.2 per cent.

IATA added that it expected 4.35 billion people to fly during 2023, a figure which is ¡°closing in¡± on 2019¡¯s traffic figure of 4.54 billion

Willie Walsh, director general of IATA, said: ¡°Airline financial performance in 2023 is beating expectations. Stronger profitability is supported by several positive developments. China lifted Covid-19 restrictions earlier in the year than anticipated. Jet fuel prices, although still high, have moderated over the first half of the year.¡±

¡°Economic uncertainties have not dampened the desire to travel, even as ticket prices absorbed elevated fuel costs. After deep Covid-19 losses, even a net profit margin of 1.2 per cent is something to celebrate.?

¡°But with airlines just making $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines.¡± ??

IATA said that the outlook for airline financial performance remained ¡°diverse¡± across different regions, although there had been improvement in all regions from the ¡°depths¡± experienced in 2020 at height of the pandemic. The industry is expected to remain loss-making in several regions, including Asia Pacific, Latin America and Africa in 2023.