The aviation industry is set to achieve record revenues in 2024, nearing the $1 trillion mark. However, expenses are also projected to reach a record high of $936 billion, resulting in a net profit of $30.5 billion.
This translates to a modest net margin of just over 3 per cent, which, while not record-breaking, signifies a substantial recovery from the financial challenges of recent years.
According to the International Air Transport Association (IATA) Director General Willie Walsh, the performance is a testament to the industry's resilience and hard work.
"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," he said.
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Walsh told delegates at the IATA Annual General Meeting in Dubai that 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," he said.
Strengthening airline profitability and growing financial resilience is seen as an important ingredient to sustain the aviation sector growth.
"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," Walsh remarked.
While the airline industry is on the path to sustainable profits, there is a big gap still to cover. A 5.7 per cent return on invested capital is well below the cost of capital, which is over 9 per cent.
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The airline industry currently earns a mere $6.14 per passenger, an indication of just how thin airline profits are, which Walsh said is barely enough for a coffee in many parts of the world.
He suggested that to improve profitability, resolving supply chain issues is of critical importance so that the industry can deploy fleets efficiently to meet demand.
More importantly, the IATA boss said that 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."
Africa outlook
IATA forecasts African airlines' net profit to grow more slowly to $0.1 billion, 0.6 per cent increase and only a $0.90 profit margin per passenger, reflecting an industry that is still struggling on the continent.
Airline demand in Africa, however, is expected to improve with revenue passenger kilometres (RPK), a key indicator of how busy airlines are and how much revenue they are generating from passengers, is expected to increase by 8.5 per cent.
Available seat kilometres (ASK), another key measure of an airline's carrying capacity to generate revenue, is forecast to grow 9.1 per cent in the same period, according to IATA.
A combination of high costs of operation and less willingness to travel by air continues to make it hard for African carriers to operate profitably. Moreover, connectivity challenges dampen the industry's expansion and performance.
Despite these headwinds, IATA maintained that there is sustained demand for air travel in Africa, which should allow the market to deliver a second year of profitability.
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Global airlines' profitability is expected to strengthen in 2024 as revenues grow slightly faster than expenses. Operating profits are expected to reach $59.9 billion, 14.7 per cent higher from $52.2 billion estimated for 2023.
Net profits, however, are expected to grow slightly more slowly at 11.3 per cent, from $27.4 billion estimated for 2023 to $30.5 billion estimated for 2024.
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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 per cent from $646 billion in 2023.
Growth in revenue passenger kilometres (RPKs) is expected to be 11.6 per cent year on year. The long-term 20-year growth trend is predicted to see passenger demand grow 3.8 per cent annually for the 2023-2043 period.
Passenger yields, the average amount of money airlines earn per passenger for each kilometre they fly, are expected to strengthen 3.2 per cent over 2023.
IATA indicated that 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.
