Oil prices dive $2 per barrel on fear Fed rate hikes will hurt demand

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Jeddah - Yasmine El Tohamy - RIYADH: Aviation will not reach pre-pandemic profitability levels of $26.4 billion anytime soon because we don’t really see the gross domestic product growth accelerating but, according to International Air Transport Association’s Chief Economist Marie Thomsen, the industry will start seeing earnings in 2023.
Global airlines are now expected to post a $9.7 billion loss in 2022, an improvement from a revised $42.1 billion loss in 2021.

The 2022 forecast is nearly $2 billion better than an earlier expectation of an $11.6 billion loss.

COVID-19 fallout
At IATA’s Annual General Meeting in Doha, Thomsen told Arab News that COVID-19’s magnitude “makes all previous crises look like a slight cold.” 

Despite the fact that China’s zero COVID-19 policy is affecting the aviation industry, she believes that the policy could be altered.

Thomsen explained that the virus has evolved, and while it has infectious variants, they are less deadly. In itself, the virus’ progression argues for fewer and fewer travel restrictions, she added. 

She said that even if airlines are thriving, they will still feel the effects of the COVID crisis for decades to come. 

HIGHLIGHTS

Global airlines are now expected to post a $9.7 billion loss in 2022, an improvement from a revised $42.1 billion loss in 2021.

The 2022 forecast is nearly $2 billion better than an earlier expectation of an $11.6 billion loss.

Future unpredictable
The risks are unpredictable and she does not know how long the war in Europe will last or what will happen to oil prices, Thomsen said. “But, nevertheless, barring unexpected events, it should be possible for the industry as a whole to show a profit next year,” she added. 

According to Thomsen, prices are still going down for consumers, and this is in the interest of the global economy since connectivity is one of the key drivers of economic growth.

In terms of aviation concerns, Thomsen described the regulatory environment that airlines are mostly concerned about as “unstable” and “fragmented.”

“Reducing global connectivity hurts not only airlines and their customers, but also global economic output,” she said. 

International Air Transport Association’s Chief Economist Marie Thomsen

Aviation in focus
Several forms of connectivity are essential for the global economy, Thomsen said, and aviation is one of them.

“Aviation is not in opposition to other modes of transport; all modes of transport are essential to the global economy,” she added.

Despite not being a government agency, IATA tries to support airlines with analysis and research even though it cannot provide funds, she said. 

According to Thomsen, governments seem to view airlines as a honeypot that the industry can dip into and profit from. “This is obviously a misconception based on our numbers; there is no honey in the pot,” she said.

As a result, the government could work on the upside of airlines’ value chain to introduce more competition if it had a different attitude toward them, she added. 

“If you have oligopolistic structures over here and hypercompetitive structures here, that’s obviously not aligned,” Thomsen said.

She concluded that, in her opinion, the main issue in the aviation industry is that they have a skewed value chain.

 

 

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