UAL - Global airline industry profits are strengthening despite economic turbulence

2023-06-05 08:09:27 ET

The global airline sector received a shot of confidence from the International Air Transport Association, which announced an expected strengthening of airline industry profitability in an upgrade of its outlook for 2023.

IATA forecast airline industry net profits are expected to reach $9.8B in 2023 to mark more than an 100% increase from the previous forecast issued last December of $4.7B. Airline industry operating profits are expected to reach $22.4B in 2023, much improved over the December forecast of a $3.2B operating profit. In terms of traffic, about 4.35B people are expected to travel in 2023, which is closing in on the 4.54B who flew in the pre-pandemic year of 2019. Also of note, cargo volumes are expected to be 57.8M tonnes, which has slipped below the 61.5M tonnes carried in 2019 with a sharp slowing of international trade volumes.

Total airline industry revenue is expected to grow 9.7% year over year to $803B. Expense growth is expected to be contained to an 8.1% annual increase. Strong bookings demand and lower fuel prices have combined to help improve bottom lines across the sector, despite the economic pressures that have held back profit expectations.

"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. Cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief. Jet fuel prices, although still high, have moderated over the first half of the year," noted IATA Director General Willie Walsh.

Airline stocks: Delta Air Lines ( DAL ), American Airlines ( AAL ), Lufthansa ( OTCQX:DLAKY ) ( OTCQX:DLAKF ), United Airlines ( UAL ), International Consolidated Airlines Group ( OTCPK:ICAGY ), Air France-KLM Group ( OTCPK:AFLYY ) ( OTCPK:AFRAF ), Southwest Airlines ( LUV ), Spirit Airlines ( SAVE ), Alaska Airlines ( ALK ), JetBlue Airways ( JBLU ), Sun Country ( SNCY ), Frontier Air Group ( ULCC ), Hawaiian Airlines ( HA ), Skywest ( SKYW ), Allegiant ( ALGT ), Mesa Air Group ( MESA ), Air Canada ( OTCQX:ACDVF ), Ryanair ( RYAAY ), Deutsche Lufthansa AG ( OTCQX:DLAKY ), Air France-KLM SA ( OTCPK:AFLYY ), International Consolidated Airlines Group S.A. ( OTCPK:ICAGY ), Wizz Air ( OTCPK:WZZAF ), easyJet ( OTCQX:EJTTF ), Ryanair ( RYAAY ), SAS Group (SASFQ), Jet2 ( OTCPK:DRTGF ), Aeroflot ( OTC:AERZY ), Finnair ( OTC:FNNNF ), Norwegian Air ( OTCPK:NWARF ), Air Berlin ( OTC:AIBEF ), China Southern Airlines ( OTCPK:ZNHYY ), Qantas Airways ( OTCPK:QABSY ), China Eastern Airlines ( OTCPK:CEAYY ), Air China ( OTCPK:AIRYY ), Volaris ( VLRS ), Copa Holdings ( CPA ), Azul SA ( AZUL ), and Gol Linhas Aereas Inteligentes ( GOL ).

The U.S. Global Jets ETF ( NYSEARCA: JETS ) is up 10.72% in 2023.

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