The good times may be coming to a close for frequent flyers.
The cheap airfare that has defined the industry in the post-pandemic era could become a thing of the past as airlines look to increase their profits going forward with demand reaching new heights.
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While globally, the industry is expected to generate $803 billion in revenues and share $9.8 billion in net profit, on average airlines will make $2.25 per passenger in 2023, according to a new report from the International Air Transport Association (IATA) -- a trade association that represents 300 airlines, or 83% of total air traffic.
"Put another way, airlines will make, on average, $2.25 per passenger. So, the value retained by airlines for the average plane trip won’t even buy a subway ticket in NYC. Clearly that level of profitability is not sustainable," IATA Director General Willi Walsh said.
The razor thin margins are a result of inflation, acute cost pressure and, in some areas, not enough labor, according to the IATA.
Of those three issues, the easiest to address seems to be the cost pressure.
It has been a mixed bad for airfare levels in 2023, according to some estimates, but Walsh is also looking at the bright side when it comes to profitability.
"Considering we lost $76 per passenger in 2020, the velocity of the recovery is strong," Walsh said.
Airfare is actually cheaper in 2023 than it was the previous year, according to NerdWallet's Travel Price Index.
Airfares hit a record high in May 2022, but April 2023 prices were down 14.6% from those May highs.
While that sounds like a positive trend, current airfare prices are actually way higher than they were pre-pandemic, with April 2023 prices rising 9.6% from their levels in 2019.
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