• Wednesday, July 17, 2024
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Increase in passengers, cargo traffic seen boosting airlines’ 2024 profits

The International Air Transport Association (IATA) announced strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts. An expected increase in passenger traffic and cargo trade across the world is expected to drive airlines’ profitability.

An aggregate return above the cost of capital, however, continues to elude the global airline industry.

Net profits are expected to reach $30.5 billion in 2024 (3.1 percent net profit margin). That will be an improvement on 2023 net profits which are estimated to be $27.4 billion (3.0 percent net profit margin). It is also an improvement on the $25.7 billion (2.7 percent net profit margin) forecast for 2024 profits that IATA released in December 2023.

“In a world of many and growing uncertainties, airlines continue to shore-up their profitability. The expected aggregate net profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses. With a record five billion air travellers expected in 2024, the human need to fly has never been stronger.

“Moreover, the global economy counts on air cargo to deliver the $8.3 trillion of trade that gets to customers by air. Without a doubt, aviation is vital to the ambitions and prosperity of individuals and economies. Strengthening airline profitability and growing financial resilience is important. Profitability enables investments in products to meet the needs of our customers and in the sustainability solutions we will need to achieve net zero carbon emissions by 2050,” said Willie Walsh, IATA’s Director General.

“The airline industry is on the path to sustainable profits, but there is a big gap still to cover. A 5.7 percent return on invested capital is well below the cost of capital, which is over nine percent. And earning just $6.14 per passenger is an indication of just how thin our profits are—barely enough for a coffee in many parts of the world. To improve profitability, resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand. And relief from the parade of onerous regulation and ever-increasing tax proposals would also help. An emphasis on public policy measures that drive business competitiveness would be a win for the economy, for jobs, and for connectivity. It would also place us in a strong position to accelerate investments in sustainability,” said Walsh.

Return on invested capital in 2024 is expected to be 5.7 percent, which is about 3.4 percentage points (PPT) below the average cost of capital.

Operating profits are expected to reach $59.9 billion in 2024, up from an estimated $52.2 billion in 2023. Total revenues are expected to reach $996 billion (+9.7 percent) in 2024—a record high. Total expenses are expected to reach $936 billion (+9.4 percent) in 2024—a record high. Total travellers are expected to reach 4.96 billion in 2024—a record high. Total air cargo volumes are expected to reach 62 million tonnes in 2024.

According to IATA, profitability is expected to strengthen in 2024 as revenues grow slightly faster than expenses (+9.7 percent vs. +9.4 percent respectively). Operating profits are expected to reach $59.9 billion (+14.7 percent from $52.2 billion estimated for 2023). Net profits, however, are expected to grow slightly more slowly at +11.3 percent, from $27.4 billion estimated for 2023 to $30.5 billion estimated for 2024.

Industry revenues are expected to reach an historic high of $996 billion in 2024.

IATA also disclosed that passenger revenues are expected to reach $744 billion in 2024, up 15.2 percent from $646 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 11.6 percent year on year. The long-term 20-year growth trend is expected to see passenger demand grow 3.8 percent annually for the 2023-2043 period.

Passenger yields are expected to strengthen 3.2 percent over 2023.

When measured in constant 2018 dollars, the real average return airfare in 2024 is expected to be $252, significantly less than the $306 of 2019. This continues the trend of ever-increasing affordability for air travel, even if the figures are somewhat skewed by shorter journey distances in 2024 due to the slower pace of recovery in some long-haul markets. In line with this, IATA’s April 2024 polling data revealed that 77 percent of respondents agree that air travel is good value for money.

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