A South African Airlines A320-200 passenger jet flies above a construction site during take-off from O.R. Tambo International Airport in Johannesburg on Friday, Jan. 24, 2020. (Image: Waldo Swiegers/Bloomberg)

African Airlines Projected to Generate $100mln Annual Profit

African airlines are expected to net an aggregate profit of around $100 million USD in 2024, maintaining the same profitability level as last year.

The International Air Transport Association (IATA) made the projection in its Global Outlook for Airport Transport report. It expects all regions to see profitability but at different rates.

In Africa, the aviation industry continues to face several challenges affecting airlines performance.

“This region has a high operational cost base and a low propensity to spend on air travel,” the outlook notes.

Per the report, infrastructure and connectivity challenges also dampen the industry’s expansion and performance.

“Despite these headwinds,” IATA says, “there is sustained demand for air travel, which should allow the market to maintain the same level of profitability in 2024”.

The aggregate net profit of the airlines this year is expected to be approximately 100 million US dollars, with 0.6% net profit margin.

That is only 0.9 US dollar profit per passenger – a figure way lower than the $6.14 industry-wide.

Geopolitical dynamics are a key factor weighing on profitability this year, states the Global Outlook for Airport Transport.

Outlook Continues to Improve

Globally, IATA announced strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts. An aggregate return above the cost of capital, however, continues to elude the global airline industry.

The report says net profits are expected to reach $30.5 billion this year with 3.1% net profit margin. That will be an improvement on 2023 net profits which are estimated to be $27.4 billion.

Other Key forecasts include:

  • Return on invested capital in 2024 is expected to be 5.7%, which is about 3.4 percentage points (ppt) below the average cost of capital.
  • Operating profits are expected to reach $59.9 billion in 2024, up from an estimated $52.2 billion in 2023.
  • Total revenues are expected to reach $996 billion (+9.7%) in 2024 – a record high – while total expenses are expected to reach $936 billion (+9.4%) in 2024 – a record high.
  • Total travelers are expected to reach 4.96 billion in 2024 – a record high and air cargo volumes are projected to reach 62 million tonnes in 2024.

“In a world of many and growing uncertainties, airlines continue to shore-up their profitability,” says IATA’s Director General Willie Walsh, indicating expected aggregate net profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses.

While the industry is on the path to sustainable profits, there is still a big gap still to cover.

The director says: “this year, airlines in aggregate will earn a 5.7% return on invested capital this year, and that is well below the average 9% cost of capital.”

“For all the value airlines create, how much profit do they retain per passenger? $6.14,” Walsh states. “To translate into the coffee benchmark that has become an AGM tradition, that buys one single espresso in this hotel’s coffee shop”.

To improve profitability, the director General suggests, “resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand. And relief from the parade of onerous regulation and ever-increasing tax proposals would also help.”