Global airlines are expected to make $30.5 billion net profits in 2024 (3.1% net profit margin), an improvement on 2023 net profits estimated to be $27.4 billion, International Air Transport Association (IATA) has said.

 

The figure is also an improvement on the $25.7 billion (2.7% net profit margin) forecast for 2024 profits that IATA released in December 2023.

 

Other highlights from IATA forecast include:

•  Return on invested capital in 2024 is expected to be 5.7%, 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%) in 2024 -- a record high.  

•  Total expenses are expected to reach $936 billion (+9.4%) 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.

 

“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," said Willie Walsh, IATA’s Director General. 

 

"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 Walsh. 

 

“The airline industry is on the path to sustainable profits, but there is a big gap still to cover. A 5.7% return on invested capital is well below the cost of capital, which is over 9%. 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.

 

Outlook Drivers

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

 

Revenue

Industry revenues are expected to reach an historic high of $996 billion in 2024. Passenger revenues are expected to reach $744 billion in 2024, up 15.2% from $646 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 11.6% year on year. The long-term 20-year growth trend is expected to see passenger demand grow 3.8% annually for the 2023-2043 period.

•    Passenger yields are expected to strengthen 3.2% 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% of respondents agree that air travel is good value for money.

•    The average passenger load factor is expected to be 82.5% in 2024. This is largely in line with pre-pandemic levels (82.6% in 2019) and reflects tight supply and demand conditions from ongoing supply chain issues for aircraft and engines. 

 

IATA’s April 2024 polling data  

•    Some 39% of respondents expect to travel more over the next 12 months than they did in the previous 12-month period. The majority (54%) said that they expect to travel as much as they did in the previous 12 months. Only 6% reported that they expect to travel less.

•    Some 46% of respondents expect to spend more on travel over the next 12 months than they did in the previous 12 months. An almost equal proportion (45%) expect to spend the same on travel over the next twelve months while 9% expect to spend less. 

 

Cargo revenues

Cargo revenues are expected to fall to $120 billion in 2024 (from $138 billion in 2023). Both are down sharply from the extraordinary peak of $210 billion in 2021, but it is above 2019 revenues, which were $101 billion and an improvement on the previous forecast of $111 billion (announced in December 2023). 

 

Despite the strength of demand, cargo yields are expected to fall 17.5% in 2024 while remaining slightly above 2019 levels. This is a normalisation after extraordinary pandemic highs. A key factor in this is the significant belly capacity that entered the market in 2023 in tandem with the recovery of passenger travel. 

 

In general, air cargo is in a period of correction following an exceptional year in 2021. Yields, capacity growth, the belly-dedicated freighter split, and other key metrics are moving from the extraordinary mid-pandemic situation towards a continuation of pre-pandemic trends and levels.

 

Expenses 

Industry expenses are expected to grow to $936 billion in 2024 (+9.4% on 2023). 

 

Fuel is expected to average $113.8/barrel (jet) in 2024 translating into a total fuel bill of $291 billion, accounting for 31% of all operating costs. 

• High crude oil prices are expected to continue to be further exaggerated for airlines as the crack spread (premium paid to refine crude oil into jet fuel) is expected to average 30% in 2024.

• SAF production could rise to satisfy 0.53% of global demand for fuel in 2024, the cost of which will be $3.75 billion. That is $2.4 billion additional to what it would cost to purchase the same quantity of jet fuel. CORSIA-related costs are estimated to account for a further $600 million in 2024. 

• Industry CO2 emissions in 2024 are expected to be 935 million tonnes from consumption of 99 billion gallons of fuel. 

 

Non-fuel expenses have been well-controlled. Non-fuel unit costs are expected to be 39 cents per available tonne kilometer (ATK), unchanged from 2023. This is slightly below the 39.2 cents/ATK reported in 2019.

•  Labour costs have been tightly controlled with unit labor costs expected to be 12.9 cents/ATK, an improvement of 2.4% compared with 2023. Due to higher volumes, the overall cost of labor is expected to grow 7.6% to $214 billion in 2024. 

•  Total employment in airlines is expected to reach 3.07 million, which slightly exceeds the 2.93 million employed in 2019. 

 

Fleet

An inventory of 38.7 million flights is expected to be available in 2024. This is 1.4 million flights below previous estimates (December 2023) largely attributable to the slowing pace of deliveries in the face of persistent supply chain issues in the aerospace sector. For example, the number of aircraft deliveries scheduled for 2024 is expected to be 1,583, which is 11% less than the expectations published just months ago that anticipated 1,777 aircraft would join the global fleet in 2024. Airlines are deploying larger aircraft as a mitigating strategy.  - TradeArabia News Service