[Image File/IATA]

Airlines Set for Record Revenues Next Year

The International Air Transport Association (IATA) announced strengthened profitability projections for airlines in 2023, which will then largely stabilize in 2024. However, net profitability at the global level is expected to be well below the cost of capital in both years.

Airline industry net profits are expected to reach $25.7 billion in 2024, which will be a slight improvement from a projected $23.3 billion net profit this year.

“Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience,” Willie Walsh, IATA’s Director General, said. “People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity.”

IATA expects the Industry revenues 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.

Overall revenues in 2024 are expected to rise faster than expenses – 7.6% vs. 6.9%, strengthening profitability. While operating profits are expected to jump by 21.1% from $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.

IATA’s Director General cautioned the Industry that “profits must be put into proper perspective”, and said:

“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.”

The 2024 outlook indicates that the industry can expect normal growth patterns for both passenger and cargo.

Some 4.7 billion people are expected to travel in 2024, a historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019. Cargo volumes meanwhile are expected to be 58 and 61 million tonnes in 2023 and 2024, respectively.

“Airlines will always compete ferociously for their customers, but they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies,” said Walsh.

At the regional level meanwhile, North America, Europe, and the Middle East are expected to post net profits in 2023. Asia Pacific will join the group in 2024

IATA says it still expects Latin America and Africa to be in the red in 2024 as regions continue to recover from the pandemic at different speeds.