Airlines’ expected US$25.7 billion profit for 2024 is ‘tribute to aviation’s resilience’: Iata
Derryn Wong
[GENEVA] The global airline industry is forecast to post a net profit of US$25.7 billion and achieve record total revenue of US$964 billion next year, on the back of continued strong demand for air travel.
The International Air Travel Association (Iata) said in a report on Wednesday (Dec 6) that next year’s profit is a slight improvement of about 10 per cent from 2023, which is likely to show a US$23.3 billion net profit.
The projected total revenue for next year is 7.6 per cent higher than the expected US$896 billion in 2023.
Around 4.7 billion people are expected to travel via air in 2024, a new high that will exceed the pre-pandemic level of 4.5 billion in 2019. Cargo volumes are expected to be 58 million tonnes and 61 million tonnes in 2023 and 2024, respectively.
“Considering the major losses of recent years, the US$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,” said Iata director-general Willie Walsh.
“The recovery has been extraordinary, yet it also appears that the pandemic has cost aviation about four years of growth.”
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But Walsh noted that industry profits should also be put into perspective.
While he described the recovery as impressive, he said that the US$25.7 billion profit for 2024 translates to a net profit margin of 2.7 per cent, which is “far below” what investors in almost any other industry would accept.
“Of course, many airlines are doing better than that average, and many are struggling. But there is something to be learnt from the fact that, on average, airlines will retain just US$5.45 for every passenger carried,” he said.
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“That’s about enough to buy a basic ‘grande’ latte at a Starbucks in London. But it is far too little to build a future that is resilient to shocks for a critical global industry on which 3.5 per cent of GDP depends and from which 3.05 million people directly earn their livelihoods.”
Walsh stressed that while airlines will always compete “ferociously” for their customers, they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies.
The Iata report noted that some 40.1 million flights will be available around the world in 2024, exceeding the 36.8 million in 2023 and the 38.9 million in 2019.
Passenger revenue in 2024 will increase to US$717 billion, up 12 per cent from US$642 billion in 2023. Expenses will increase 6.9 per cent to US$914 billion.
At US$281 billion, fuel will account for 31 per cent of operating costs due to high crude oil prices, as the rack spread – the price difference between crude oil and the products refined from it – will average 30 per cent in 2024.
Overall revenue growth is still expected to outstrip the growth of expenses (at 7.6 per cent and 6.9 per cent, respectively), strengthening profitability, said the report.
But industry profitability is also “fragile”, with numerous factors that could push it into the red, said Iata. These include the macroeconomic conditions of high interest rates and inflation, the ongoing Ukraine war and Israel-Hamas conflicts, and increasing oil prices.
Continued disruptions to supply chains have also impacted aircraft maintenance and availability. Walsh said that aircraft manufacturers “continue to disappoint” with delivery and delays of new aircraft and access to spare parts, which also affects fleet operations.
The recovery of the aviation sector has also not been uniform, with regional performance predicted still to be uneven, said Iata. North America, Europe and the Middle East will increase their profitability in 2024, while Africa and South America are forecast to extend losses.
The Asia-Pacific region, meanwhile, is predicted to swing from a loss of US$100 million in 2023 to a net profit of US$1.1 billion in 2024 – representing a profit margin of 0.5 per cent – on the full recovery of international travel for the region.
Iata said travel to and from Asia-Pacific was subdued in 2023, as China eliminated the last of its travel restrictions only in the middle of this year. As things stand, China’s international travel remains at 40 per cent below pre-pandemic levels.
Looking ahead, Iata said the industry could see more stability after the lows and highs induced by the pandemic.
“From 2024, the outlook indicates that we can expect more normal growth patterns for both passenger and cargo,” noted Walsh.
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