IATA is predicting a largely stable year in 2024 following strengthened profitability projects for airlines in 2023.

Airline industry net profits are expected to reach $25.7 billion in 2024 (2.7% net profit margin), a slight improvement over 2023, which is expected to show a $23.3 billion net profit (2.6% net profit margin). Airline industry operating profits are expected to reach $49.3 billion in 2024 from $40.7 billion in 2023.

Next year, total revenues are expected to grow 7.6% year over year to a record $964 billion. Some 4.7 billion people are expected to travel in 2024, an historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019.

“Considering the major losses of recent years, the $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 Willie Walsh, IATA’s Director General. “The speed of the recovery has been extraordinary; yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo.”

However, Walsh also noted that while the recovery is impressive, a net profit margin of 2.7% 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 learned from the fact that, on average airlines will retain just $5.45 for every passenger carried. That’s about enough to buy a basic ‘grande latte’ at a London Starbucks. But it is far too little to build a future that is resilient to shocks for a critical global industry on which 3.5% of GDP depends and from which 3.05 million people directly earn their livelihoods,” said Walsh, adding that airlines remain burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies.

Outlook Drivers

Overall revenues in 2024 are expected to rise faster than expenses (7.6% vs. 6.9%), strengthening profitability. While operating profits are expected to increase by 21.1% ($40.7 billion in 2023 to $49.3 billion in 2024), net profit margins increased at less than half the pace (10%) largely due to increased interest rates expected in 2024.

Industry revenues are expected to reach an historic high of $964 billion in 2024. An inventory of 40.1 million flights is expected to be available in 2024, exceeding the 2019 level of 38.9 million and up from the 36.8 million flights expected in 2023.

Passenger revenues are expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 9.8% year on year. While that is more than double the pre-pandemic growth trend, 2024 is expected to mark the end of the dramatic year-on-year increases that have been characteristic of the recovery in 2021-2023.

Regional RoundUp

The regions have recovered from the pandemic at different speeds. At the regional level, North America, Europe and the Middle East are expected to post net profits in 2023. Asia Pacific will join the group in 2024, but we still expect Latin America and Africa to be in the red in 2024.

North America remains the standout region in terms of financial performance. It was the first market to return to profitability in 2022 and built on this performance in 2023 by delivering efficiencies, particularly in high passenger load factors. Consumer spending has remained solid, despite cost-of-living pressures, and the demand for air travel remains robust and is expected to outpace growth in capacity into 2024.

The Traveller's Viewpoint

A recent public opinion poll (14 countries, 6,500 respondents who have taken at least one trip in the last year) revealed that 97% of travellers expressed satisfaction with their travel. Moreover, 88% agreed that air travel makes their lives better and 80% agreed that air travel is good value for money.

Consumers can expect airfares to continue to track rising costs, particularly oil. IATA data, however, show that competition continues to drive price benefits for consumers. The average real return air fare in 2023 is expected to be $254 which is 20% lower than the average fare of $315 in 2019.

IATA public opinion polling found that 89% agreed that air travel is a necessity for modern life, and that 89% agreed that air connectivity is critical to the economy.

A third of travellers polled say they are traveling more than they did pre-pandemic. Some 49% indicate that their travel habits are now similar to pre-pandemic. Only 18% said that they were travelling less.

Looking ahead, 44% say that they will travel more in the next 12 months than in the previous 12 months. Only 7% say they will travel less and 48% expect to maintain similar levels of travel in the coming 12 months as in the previous 12 months.

Source: Travelweek