Technology

Global airline industry’s financial situation improves in Q3: IATA

Pakistanis privileged to visit Dubai without rapid antigen test report

MONTREAL: The latest sample of airlines’ third quarter financial results has confirmed that the industry’s financial situation improved at the global level as more markets reopened, travel demand picked up and cargo revenues remained robust.

According to the data released by the International Air Transport Association (IATA), the industry-wide operating loss was 3.4 percent of revenues in July-September period, compared with 17.8 percent loss in the previous quarter.

However, the global picture hides some regional variation. North American, European and Latin American airlines reported improvements in operating incomes on the back of passenger recovery in larger domestic markets (the US, Brazil) and also some short-haul routes such as intra-Europe and North-Central America.

In contrast, operating losses increased compared with Q2 in Asia Pacific as new Covid-19 outbreaks and the resulting lockdowns stifled the recovering domestic demand in many key markets (China, Australia, Japan) while international traffic remained subdued.

Looking ahead, the risks to airlines’ financial recovery are rising. Several countries have introduced new Omicron-driven travel restrictions including complete travel bans and testing requirements for fully vaccinated passengers. This is likely to negatively impact travellers’ plans in the short-term.

Indeed, the initial data shows that passenger bookings for future travel fell sharply across domestic and in particular international routes since late-November. If the new travel curbs remain in place longer – despite their unclear impact on infection rate – they might disrupt the recovering passenger revenue stream just at the time when some airlines finally reached profitability.

Additional pressure on airlines’ financials has come from elevated fuel prices that put upward pressure on operating costs. Indeed, although jet fuel prices fell sharply in the final week of November following the Omicron news, they remain above pre-pandemic 2019 levels (+9 percent) while passenger traffic is down 50 percent compared with pre-crisis period (based data from October).

Looking ahead, the International Energy Agency (IEA) expects that the emergence of the new, more contagious strain and the related international travel restrictions will reduce jet fuel demand and put downward pressure on jet fuel prices.

According to IATA, airline share prices have fallen in response to Omicron news.As of December, the global airline share price index is 37 percent below pre-crisis levels while wider equity markets have risen by 30 percent since the start of the pandemic.

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