Airline profitability outlook improves for 2024
The International Air Transport Association (IATA) has announced strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts.
An aggregate return above the cost of…
The International Air Transport Association (IATA) has announced strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts.
An aggregate return above the cost of capital, however, continues to elude the global airline industry, IATA said.
Outlook highlights include:
• Net profits are expected to reach $30.5 billion in 2024 (3.1% net profit margin). That will be an improvement on 2023 net profits which are estimated to be $27.4 billion (3.0% net profit margin). It is also an improvement on the $25.7 billion (2.7% net profit margin) forecast for 2024 profits that IATA released in December 2023.
• 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,” said Willie Walsh, IATA’s Director General.
“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.”
He added: “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.”
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.
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