Commentary: Airlines reap record profits, but will ticket prices drop?

SINGAPORE: The last decade has been a mixed bag for the airline industry. Before the eruption of the COVID-19 pandemic, the industry recorded an average net profit margin of about 4.2 per cent from 2015 to 2019, according to the International Air Transport Association (IATA), because of a boom in travel as well as low oil prices.

When the pandemic hit, the global aviation industry took a nosedive almost immediately. Global travel ground to an abrupt halt as governments implemented unprecedented movement restrictions to contain the virus. This turbulence led to staggering losses, with airlines haemorrhaging US$183.3 billion from 2020 to 2022.

But post-pandemic, the industry is again surging. For 2023, IATA expects airlines to log net profits of US$9.8 billion, and while the expected 1.2 per cent net profit margin is nowhere near the record before the pandemic, they are good by the industry’s historic standards.

Nearer home, Singapore Airlines (SIA) has followed a similar trajectory. During the pandemic, it incurred the largest losses in its history and received support from the government.

But its traffic and profits have bounced back nicely post-pandemic. In fact, during the latest quarter it logged a record quarterly net profit of S$734 million (US$540 million), due in part to robust demand for air travel during the mid-year school holidays.

SIA wasn’t the only airline to enjoy a resurgence in travel. Dubai’s Emirates Group recorded its most profitable year with 10.9 billion dirhams (US$2.9 billion) for the 12 months ended March. Delta Air Lines raked in a record US$1.8 billion profit for the quarter ended June as summer vacationers packed planes.

Despite a slow reopening, Hong Kong’s Cathay Pacific recorded its first half-year profit since the pandemic, earning HK$4.26 billion (US$543 million) in the first six months of 2023. All Nippon Airways too achieved its first full-year profitability of ¥89.4 billion (US$606 million) in FY2022, after inbound travel rose strongly in the fourth quarter.