IATA forecasts record $30.5 billion profits for airlines in 2024
Industry revenues are expected to reach an historic high of $996 billion in 2024
Dubai: The International Air Transport Association (IATA) in its 80th Annual General meeting announced an improved profitability outlook for airlines in 2024 compared to its December 2023 forecasts. However, the industry is not out of the woods yet, with challenges such as high fuel costs and supply chain issues persisting.
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Key highlights
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Net profits are expected to reach $30.5 billion in 2024, a significant improvement from the $27.4 billion estimated for 2023.
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Total revenues are expected to reach a record high of $996 billion in 2024, driven by a 15.2% increase in passenger revenue.
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Passenger traffic is also expected to reach a record high of 4.96 billion travelers in 2024, reflecting strong pent-up demand for air travel.
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Despite the positive outlook, airlines are still struggling to achieve a return on invested capital that exceeds the cost of capital.
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The current return is estimated to be 5.7%, which is 3.4 percentage points below the average cost of capital.
Profitability drivers
The improvement in profitability is attributed to a faster growth in revenue (9.7%) compared to expenses (9.4%) in 2024. Passenger yields are also expected to strengthen by 3.2% over 2023. However, the average real airfare in 2024 is expected to be $252, which is significantly lower than the pre-pandemic level of $306 in 2019.
Cargo demand softens
While passenger demand is booming, cargo revenues are expected to fall to $120 billion in 2024, down from $138 billion in 2023. This is a significant decline from the peak of $210 billion reached in 2021, but it remains above pre-pandemic levels. Cargo yields are also expected to drop by 17.5% in 2024, reflecting a normalization from the extraordinary highs witnessed during the pandemic.
Expense concerns
Industry expenses are expected to reach $936 billion in 2024, with fuel costs being a major concern. The average jet fuel price is expected to be $113.8 per barrel in 2024, translating to a total fuel bill of $291 billion. Additionally, the high cost of sustainable aviation fuel (SAF) and potential CORSIA-related costs are adding to the financial pressure on airlines.
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Fleet and supply chain challenges
The availability of new aircraft is hampered by ongoing supply chain issues in the aerospace sector. The number of aircraft deliveries in 2024 is expected to be 1,583, which is lower than the previously anticipated 1,777. Airlines are mitigating this challenge by deploying larger aircraft.
Risks to the outlook
The airline industry's profitability remains fragile and can be impacted by various factors, including:
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Global economic developments: A slowdown in economic growth or rising interest rates could dampen travel demand
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Geopolitical tensions: War and regional conflicts can disrupt travel patterns and increase operational costs.
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Supply chain disruptions: Ongoing supply chain issues can limit capacity expansion and fleet renewal.
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Regulatory burdens: Stringent regulations and rising costs of compliance can put additional pressure on airline finances.
Regional Outlook
All regions are expected to generate profits in 2024, with Asia-Pacific carriers experiencing the most significant increase. North America remains the largest contributor to industry profits, followed by Europe. Latin America, the Middle East, and Africa are also expected to see improvements in profitability.
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Passenger perspective
Despite the challenges faced by airlines, air travel remains a valuable service for consumers. IATA's survey revealed that 97% of travelers were satisfied with their travel experience. Additionally, a vast majority of respondents recognized the critical role of air transport in connecting people and economies globally.
Looking ahead
The airline industry is on the path to recovery, but challenges remain. Addressing supply chain issues, controlling costs, and navigating a volatile geopolitical landscape will be crucial for airlines to achieve sustainable profitability in the long term. The industry also remains committed to its goal of achieving net zero carbon emissions by 2050.