The aviation industry continues to struggle with high supply chain costs, despite cheaper oil prices offering potential relief, according to the International Air Transport Association (IATA). Lower oil and jet fuel prices are expected to boost airline profitability in the coming year, says Marie Owens Thomsen, IATA’s senior vice-president of sustainability and chief economist.
For 2023, IATA projects a global airline net profit margin of 3.1%, or about $6.14 per passenger, which surpasses the 2019 margin of 3.1% and $5.80 per passenger. Historically, the airline industry’s highest net profit margin has been between 5% and 6%.
With global oil prices dropping below $80 per barrel, the industry sees a positive impact on both the broader economy and aviation. This price decline is due in part to large economies, such as China, moving from diesel to liquefied natural gas for truck transport, as well as increased U.S. oil production.
However, despite the decrease in fuel prices, airlines are facing cost pressures elsewhere. Higher labor, maintenance, and parts costs, along with supply chain disruptions, continue to weigh on the industry. Ms. Thomsen noted that airlines, heavily indebted since the pandemic, may take years to recover fully and achieve higher profits.
The IATA-hosted World Financial Symposium and World Passenger Symposium, held in Bangkok from Oct 30-31, highlighted these issues. IATA predicts Thailand’s air passenger numbers will grow annually by 3.88% between 2024 and 2043. Demand has already returned to 88% of 2019 levels, positioning Thailand to become a top 15 global market for aviation within the next two decades.
Before the pandemic, 84% of tourists traveled to Thailand by air, contributing more than 7.4% to the country’s GDP. To support further growth, IATA advises the Thai government to avoid implementing a tourism tax that could dampen passenger demand and instead seek alternative ways to strengthen tourism.
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