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IATA's SVP Sustainability & Chief Economist Marie Owens THOMSEN: ‘The Industry Is Absolutely Phenomenally Talented in Terms of Controlling Costs’

June 07, 2023
IATA's SVP Sustainability & Chief Economist Marie Owens THOMSEN: ‘The Industry Is Absolutely Phenomenally Talented in Terms of Controlling Costs’

Speaking at the Economic Outlook – Media Briefing, IATA's Senior Vice President Sustainability & Chief Economist, Marie Owens THOMSEN, talked about the post-pandemic aviation era and stated that while demand is recovering, other challenges are also emerging.

Emphasizing that while fuel prices are heavily impacted by the Russia-Ukraine conflict that started in 2022, THOMSEN shared the following about how the rising fuel prices affected the aviation industry in the recovery period from COVID. "For sure, one of the reasons behind the inflation figures is the fuel prices that are heavily impacted in the course of the war that broke out in February 2022 in Europe. So, our industry is unique in this context because we use more fuel than sort of consumers do. Yes, fuel weighs more in our pricing. Because it represents up to 30 percent of the airline costs, and on top of it, we don't use crude oil. We use jet fuel, so we have a higher price and a larger weight than normal people. That has always been a challenge for us that impact our margins; no doubt that it still is not necessarily impacting the traffic, as we will see soon.

So now there is some easing in those prices, and that's good news, but the spread remains on the high side between jet and crude. So, the traffic has not been dented by any of these cost solutions, and we expect the full year 2023 traffic to spend 12.2 percent below 2019. Our definitions are revenue passenger kilometers, and it's a measure that takes into account the number of passengers at the distance they travel, both of which are important and very important to measure our traffic. So, we're nearly 2019 levels, and we think that the industry as a whole will exceed 2019 levels next year. So next year is when we expect full recovery from the COVID itself. But we have to also remind ourselves that that doesn't call up the trend that we have in traffic from 2019. If COVID had never happened, we are still well below the trend. So, we are recovering 2019 level, but we're still here compared to a normal non-COVID scenario."

Praising the industry's phenomenal talent in terms of controlling costs, THOMSEN expressed that air cargo was the real savior of the aviation industry in 2021 by generating most of the revenue during the COVID pandemic. "The industry is absolutely phenomenally talented in terms of controlling costs. So, the expenses are limited to 781 billion USD this year, and revenue, thanks to passengers really wanting to travel, is rising to 803 billion USD this year, leaving an industry operating profit of 22 billion. So, of course, when you see the passenger minus 1.1, you might think that's problematic, but then we have to put it again in the context of previous experiences in 2022 to yield 98 percent.

The cargo was our absolute savior in 2021. I'm sure you all are aware, and some of the buoyancy is going out of the cargo because of the growth and trade. But nevertheless, you're expecting 142 billion USD in cargo revenue this year, which is significantly higher than the 100 million USD revenue that the cargo generated for at least 2019. The yielding cargo is likely to drop by almost 29 percent this year, but that has to be analyzed in the context of the absolutely phenomenal years of 2021-2022. This leaves us with a profit of 900 billion USD, and again I cannot recommend this industry strongly enough for the absolutely marvelous resilience that we have to be able to go from a loss of about 140 billion USD in 2020 to a positive result of nearly 10 billion USD in 2023. That's an amazing turnaround in such a short period of time."

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