It's been a tumultuous last few years as the travel sector has endured Covid. However, the Cirium Airline Finance Rankings - 2021 and First Half 2022, illustrate some mostly positive signs for the aviation industry. In general, losses are shrinking and revenue is rising. Let's dig into the report!
Losses Pile Up But Lessen
We'll start with the bad news. Cirium records an industry net loss of nearly $220 billion since the pandemic began. Of that $220 billion, airline groups accumulated $42 billion in net losses in 2021 and $15 billion for the first half of 2022.
“It’s a positive sign that the net deficit is decreasing year-over-year."
Although these numbers are astronomical, the silver lining is that these losses are gradually shrinking.
“It’s a positive sign that the net deficit is decreasing year-over-year. In 2020, the revenue decline translated into net losses of $160 billion, another $42 billion last year and losses for the first half of this year total around $15 billion,” said Jeremy Bowen, CEO, Cirium.
Furthermore, from a revenue perspective, revenues for the world’s airline groups more than halved in 2020 and, despite some recovery, ended 2021 still down by over 40% on pre-pandemic levels. At $500 billion, revenues remain lower than they were 15 years ago.
A Silver lining on the Horizon
Although these financial figures are poor, zooming out to a macro-level, the industry is trending in the right direction.
"If we assume that there are no further shocks to the industry, there is the possibility that the industry may break even in the second half of the year, led by US and European groups,” said Bowen.
Looking at passenger levels, demand has been recovering, with global revenues up by 70% for the first six months of 2022, bringing the total to within 20% of 2019 levels.
"If we assume that there are no further shocks to the industry, there is the possibility that the industry may break even in the second half of the year."
Below is a financial overview of the aviation industry from Cirium's report.
Early results for the September quarter show the six largest US carriers now with record revenues and an overall net profit for the first nine months of the year, putting the industry on course to post a modest profit for the year if current trends persist.
The major European airline groups also showed a strong recovery in first-half revenues, following the lifting of travel restrictions in early 2022 which released pent up passenger demand.
Traffic within Western Europe has been running at around 95% of pre-pandemic levels since the middle of the year, raising revenues and returning the largest groups to profitability in the September quarter.
A Different Story for APAC
Unfortunately, it's a different story out east. The Asia-Pacific region continues to struggle, with China's ongoing Covid lockdowns being a major factor.
Chinese airlines posted a 35% decline in revenue and a net loss of nearly $10 billion in the first half of 2022, higher than either of the previous two years. Going into the second half of the year, that deficit looks like it will rise.
"Whether recovery continues into 2023 and beyond will be subject to the vagaries of the global economy."
However, the situation is more promising for the rest of the region. China's losses are likely to be offset to an extent by airlines operating in other APAC countries, but on current performance, that looks unlikely to be enough to counter the deficit coming from China.
Meanwhile, airlines in the Middle East showed a strong operating profit in 2021 and more or less broke even at the net level.
Also worth noting, as volumes returned in short and medium-haul markets, low-cost carriers have bounced back, posting positive margins and the fastest revenue growth of any segment.
Below is a full regional breakdown from Cirium's report.
As for what's ahead, that remains uncertain.
The Cirium report states, "whether recovery continues into 2023 and beyond will be subject to the vagaries of the global economy. What seems more certain is that we will have to wait a little longer yet before the airline industry emerges as an investment stock."