The International Air Transport Association (IATA) announced positive airline profitability projections in 2024 compared to June and December 2023 forecasts. However, the aggregate return above the cost of capital remains an unknown for the global airline industry .
Highlights of the projections include:
- Net profits expected to reach US$30,5 billion in 2024 (3,1% net profit margin). This will represent an improvement over 2023 net profits, estimated at $27,4 billion (3,0% net profit margin). It is also an improvement over the 2024 profit forecast of US$25,7 billion (2,7% net profit margin) that IATA released in December 2023.
- The return on invested capital in 2024 should be 5,7%, which is about 3,4 percentage points (ppt) below the average cost of capital.
- Operating profits expected to reach US$59,9 billion in 2024, above the US$52,2 billion estimated in 2023.
- Total revenues expected to reach record $996 billion (+9,7%) in 2024.
- Total spending is expected to reach a record $936 billion (+9,4%) in 2024.
- The total number of travelers is expected to reach a record 4,96 billion in 2024.
- Total air cargo volumes expected to reach 62 million tons in 2024.
Impact factors on estimates
Profitability should strengthen in 2024 as revenues rose slightly faster than expenses (+9,7% versus +9,4%, respectively). Operating profits are expected to reach US$59,9 billion (+14,7% compared to the US$52,2 billion estimated for 2023). Net profits, however, are expected to grow a little more slowly, increasing +11,3% and reaching an estimated US$30,5 billion for 2024 versus an estimated US$27,4 billion for 2023.
Revenue
The sector's revenues are expected to reach an all-time high of US$996 billion in 2024.
Revenue from enger transport should reach US$744 billion in 2024, representing an increase of 15,2% compared to US$646 billion in 2023. The increase in revenue measured in paying enger kilometers (RPKs) should be 11,6% compared to the year previous. The 20-year long-term growth trend is expected to promote a 3,8% increase in enger demand from 2023 to 2043.
- Revenues from enger transport are expected to increase by 3,2% in 2023.
- When measured in constant 2018 dollars, the actual average round-trip airfare in 2024 is expected to be $252, significantly lower than the 306 figure of $2019. This continues the trend of increasingly affordable prices for air travel, even if the numbers will be skewed somewhat by shorter travel distances in 2024 due to the slower pace of recovery in some long-haul markets. In line with these results, data from IATA's April 2024 survey revealed that 77% of respondents agree that air travel is good value for money.
- The average enger occupancy rate is expected to be 82,5% in 2024, largely in line with pre-pandemic levels (82,6% in 2019) and reflects the tight supply and demand conditions due to ongoing problems in the supply chain. aircraft and engine supplies.
IATA's April 2024 survey data is in line with expectations for continued strong performance in enger markets.
- About 39% of respondents expect to travel more in the next 12 months than in the previous 12-month period. The majority (54%) said they expect to travel as much as they did in the previous 12 months. Only 6% reported that they expect to travel less.
- Around 46% of respondents expect to spend more on travel in the next 12 months than 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.
It is estimated that the cargo revenue decline, reaching US$120 billion in 2024 (from US$138 billion in 2023). This represents a dramatic decline from 210's extraordinary peak of $2021 billion, but remains above 2019 revenues of $101 billion and represents an improvement over 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, remaining slightly above 2019 levels. This is a normalization after extraordinary increases during the pandemic. An important factor in this is the significant cargo capacity that will enter the market in 2023 with the recovery of enger travel.
Overall, air cargo is in a period of correction after an exceptional year in 2021. Yields, capacity growth, dedicated freighter share and other key metrics are moving from the extraordinary mid-pandemic situation to a continuation of trends and pre-pandemic levels.
Expenses
The sector's expenses are expected to rise and reach US$936 billion in 2024 (+9,4% compared to 2023).
The average price of the fuel of US$113,8/barrel (jet) in 2024, which means a total fuel bill of US$291 billion, representing 31% of all operating costs.
High crude oil prices are expected to be even more exaggerated for airlines, as the crack spread (the paid to refine crude oil into jet fuel) is expected to average 30% in 2024.
- SAF production could increase to meet 0,53% of global fuel demand in 2024, the cost of which will be US$3,75 billion. That's $2,4 billion more than the same amount of jet fuel would cost. CORSIA-related costs are estimated to represent an additional US$600 million in 2024.
- The sector's CO2 emissions in 2024 are expected to reach 935 million tons due to the consumption of 99 billion gallons of fuel.
Non-fuel expenses are well controlled. Non-fuel unit costs are estimated to reach 39 cents per available ton of cargo kilometer (ATKm), unchanged from 2023. This value is slightly below the value of 39,2 cents per ATK ed in 2019.
- Labor costs have been tightly controlled, and unit labor costs are expected to be 12,9 cents per ATK, an improvement of 2,4% compared to 2023. Due to higher volumes, the overall cost workforce is expected to grow 7,6%, reaching US$214 billion in 2024.
- Total airline employment is expected to reach 3,07 million, suring the 2,93 million employment mark in 2019.
Fleets
In total, 38,7 million flights are expected in 2024. This number is 1,4 million flights below previous estimates (December 2023), which can be largely attributed to the slowdown in aircraft deliveries due to issues persistent in the aerospace supply chain. For example, the number of aircraft deliveries scheduled for 2024 is expected to be 1.583, which is 11% lower than expectations published a few months ago, which predicted 1.777 aircraft entering the global fleet in 2024. Airlines are adopting larger aircraft as a mitigation strategy.
Risks
The sector's profitability is fragile and can be positively or negatively affected by several factors:
- Global Economic Developments: Historically, airline prospects have been closely tied to global economic trends. However, the sector has been quite resilient in the face of inflation, high interest rates and the slowdown in GDP growth in the post-pandemic period. Economic developments in China should be watched closely. Slowing growth, youth unemployment and the relative strength of the services sector relative to the manufacturing sector are indications that China's economy is in transition, which could have broad impacts beyond its borders.
- War: The operational impact of the war between Russia and Ukraine and the war between Israel and Hamas was largely limited to the immediate neighborhood of these conflicts. An increase in either conflict could negatively change the economic outlook.
- Supply chains: Supply chain issues continue to affect global trade and business. Airlines have been directly affected by unforeseen maintenance issues on some aircraft/engine types and delays in the delivery of aircraft and aircraft parts, limiting capacity expansion and fleet renewal.
- Regulatory risks: On the regulatory side, airlines may face increasing compliance costs and additional costs related to enger rights regimes, regional environmental initiatives and accessibility requirements.
- Public politics: With more people going to the polls than in any other year, 2024 could significantly change the global political landscape. While an increased political focus on business-friendly policies and strengthening economies is welcome, a policy shift away from global institutions, international trade and polarized policy paralysis would likely be detrimental. Furthermore, as airlines redouble their decarbonization efforts, any slippage in the political resolve to achieve net zero carbon emissions by 2050 could put at risk the political airlines need to achieve this important goal.
Summary of each region
In 2024, all regions are expected to generate profits for the second year in a row, but the most significant increase is expected to be from airlines in the Asia-Pacific region.
North America
A North America remains the region with the most significant contribution to industry profits, ed by a high enger occupancy rate, robust earnings and strong consumer spending despite cost of living pressures. In 2024, enger demand (7% growth in RPK) and strong load factor of 84% are expected to revenue development and operational profitability. Canada has slower traffic growth and higher wage pressure than the US market.
Europe
A Europe has a positive performance outlook, with demand expected to remain strong into 2024. However, supply chain issues, combined with high interest rates and the risk of labor disputes, could limit prospects for profit growth in the short term.
Asia Pacific
The Tokyo Station area is filled with office buildings and business complexes, but it’s a fantastic choice for visitors. Why? Asia Pacific is expected to for half of global RPK growth in 2024, driven primarily by the recovery of domestic markets in China, Japan and Australia. International travel in the region remains subdued, particularly in China, where it is still below pre-COVID levels. This indicates that there is still a lot of pent-up demand for international travel in the region, which will likely boost future growth prospects.
Latin America
A Latin America has recorded a steady improvement in financial performance since 2020, even with variable performance across the region. When financial performance is below expectations, this is largely a consequence of the economic and social turmoil seen in parts of the region. The countries of Central America, in particular Mexico, El Salvador, Guatemala and Honduras, are those that contribute most to the increase in profits in the region. The more positive outlook for 2024 is due to the fact that airlines in the region reported strong sales growth and high profitability in the first quarter of the year and raised their full-year estimates.
Middle East
O Middle East benefits from the strength of the region's economies and its global hubs. The UAE continues to benefit from its attractiveness to leisure and business travelers. Meanwhile, Saudi Arabia's massive investments in infrastructure and tourism are delivering robust growth in enger and cargo volumes. Although airlines continue to increase capacity, yields remain healthy and demand for travel remains strong and appears likely to continue apace. Geopolitical risks are the main threat, particularly for airlines in the Levant region. Gulf airlines are relatively less affected unless tensions between Iran and Israel rise.
Africa
A Africa has a high operating cost base and a low propensity to spend on air travel. Furthermore, connectivity challenges hamper the sector's expansion and performance. Despite these unfavorable factors, there is continued demand for air travel, which should allow the market to have a second year of profitability.
2023
Airline profit in 2023 was better than expected in IATA's December outlook. 2023 revenues are now estimated to reach $908 billion ($12 billion more than the previous forecast). Expenses increased to $856 billion ($1 billion more than the previous forecast) and net profit reached $27,4 billion industry-wide ($4,0 billion more than the previous forecast ). As a result, the net profit margin for 2023 was 3,0%, above the previous forecast of 2,6%.
Travelers' opinion
Air travel continues to add value to consumers. IATA's April 2024 public opinion survey revealed that 97% of travelers expressed satisfaction with their trips. Furthermore, 91% agreed that air connectivity is fundamental to the economy and 89% said it has a positive impact on societies.
engers want a safe, sustainable, efficient and profitable airline industry. IATA's public opinion survey showed the important role of the airline sector, according to travelers:
- 86% said business travel is an easy investment to justify.
- 77% agreed that air travel is good value for money.
- 90% said air travel is a necessity of modern life.
- 83% recognized that the global air transport network is a fundamental contribution to the UN Sustainable Development Goals.
Aviation remains committed to its goal of achieving net zero carbon emissions by 2050. Travelers are expressing high levels of confidence in this commitment: 82% believe this is the right goal, 76% say we will be able to fly sustainably, and 78% agree that aviation leaders are taking the climate challenge seriously.
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Street: IATA
