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Improving Airline Financial Performance Supportive of Positive Momentum for Aircraft Lessors

This commentary reviews airline financial performance.

Key highlights include:
• The global airline industry is expected to restore profitability in 2023 for the first time since the onset of the Coronavirus Disease (COVID-19) pandemic, reflecting strong demand for travel as well as actions taken by airlines to remove costs and improve efficiency.
• With airline financial performance improving in 2022, most airlines returned to paying status. Further, improving airline confidence in forward earnings supports demand for new aircraft to expand capacity to meet rebounding travel volumes. This is a positive for aircraft lessors.
• Slowing global economic growth, higher fuel prices relative to historical levels, a strong U.S. dollar, inflationary pressures , and higher labor and borrowing costs all present downside risks to the restoration of industry profitability in 2023.

“Per forecasts from the International Air Transport Association (IATA), the industry is expected to generate a post-tax profit of $4.7 billion in 2023, compared to an estimated loss of $6.9 billion for 2022. While this would be the smallest industry profit in more than a decade, the improved performance is expected despite the ongoing headwinds from elevated energy prices, inflationary pressures, labor shortages and rising interest rates driving funding costs higher” said David Laterza, Senior Vice President, Head of U.S. Non-Bank Financial, Global FIG.