• Saturday, May 25, 2024
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BusinessDay

Aviation stakeholders upbeat despite trapped funds in Nigeria, reduced China travel

Airlines with the largest Max 737 aircraft

Despite trapped funds from Nigeria and reduced China air travel, stakeholders are optimistic about the global aviation industry growth in 2024.

Organisations such as the International Air Transport Association (IATA), the International Bureau of Aviation (IBA), Airbus, the Airport Council International, and the Centre for Aviation all provided detailed insights into the bright prospects awaiting the global aviation industry in 2024.

IATA has predicted that total revenue for the global airline industry should rise by 7.6 percent to reach $964 billion in 2024.

It anticipates higher net profitability compared to 2023, a situation that could encourage innovation and improved services among industry players.

Often referred to as the “trade association of the global airline industry,” the organisation outlined various expectations for 2024. Some of these include: “Airline industry net profits are expected to reach $25.7 billion in 2024 (2.7 percent net profit margin).

“That will be a slight improvement over 2023, which is expected to show a $23.3 billion net profit (2.6 percent net profit margin). In both 2023 and 2024, the return on invested capital will lag the cost of capital by 4p.p., as interest rates around the world have risen in response to the sharp inflationary impulse.”

Others include “airline industry operating profits are expected to reach $49.3 billion in 2024 from $40.7 billion in 2023”. “Expense growth is expected to be slightly lower at 6.9 percent for a total of $914 billion.”

However, in terms of expected passenger traffic for 2024, IATA predicted that around “4.7 billion people are expected to travel in 2024, an historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019.”

In terms of the volume of physical goods to be moved around via aero planes, the agency said that it expects the total cargo volume to increase from 58 million metric tonnes in 2023 to 61 million metric tonnes in 2024. This represents a rise in volume by 3 million metric tonnes.

Speaking about this expectation, Willie Walsh, IATA’s director general, said: “Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience. People love to travel, and that has helped airlines to come roaring back to pre-pandemic levels of connectivity.

“The speed of the recovery has been extraordinary, yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 on, the outlook indicates that we can expect more normal growth patterns for both passenger and cargo.”

According to him, the industry profits must be put into proper perspective, while the recovery is impressive, a net profit margin of 2.7 percent is far below what investors in almost any other industry would accept. Many airlines are doing better than that average, and many are struggling.

“Airlines will always compete ferociously for their customers, but they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs, and a supply chain populated with oligopolies.”

Adding its voice to this optimism is the International Bureau of Aviation (IBA), which predicted a slowdown in the growth of flight ticket prices for global travel in 2024. In essence, IBA anticipates that the rapid rise in flight ticket prices, a worrying scenario in 2023, won’t surface in 2024.

It said: “We can confidently predict that ticket price growth will slow and costs will eventually stabilise. With capacity growth set to continue and demand slowing in some segments, airlines will likely need to reduce fares to meet load factor and market share targets.”

Debt levels for airlines in several regions built up during the global pandemic of COVID-19 in 2020 would gradually start to ease off due to the healthier balance sheets. However, this does not include airline companies from North America.