The International Air Transport Association (IATA) has revised its profitability forecasts for airlines in 2024, showing stronger projections than those made in June and December 2023. Despite this improvement, the global airline industry still struggles to achieve an aggregate return that surpasses the cost of capital.
IATA outlook highlights:
1. The projected net profits for 2024 are expected to reach $30.5 billion, with a net profit margin of 3.1%. This represents an improvement compared to the estimated net profits of $27.4 billion (3.0% net profit margin) for 2023. It also surpasses the previously forecasted 2024 profits of $25.7 billion (2.7% net profit margin) released by IATA in December 2023.
2. The return on invested capital in 2024 is anticipated to be 5.7%, which is approximately 3.4 percentage points below the average cost of capital.
3. Operating profits are projected to increase from an estimated $52.2 billion in 2023 to $59.9 billion in 2024.
4. Total revenues are expected to reach a record high of $996 billion in 2024, reflecting a growth rate of 9.7%.
5. Total expenses are also projected to reach a record high of $936 billion in 2024, representing a growth rate of 9.4%.
6. The number of total travelers is expected to reach a record high of 4.96 billion in 2024.
7. Furthermore, total air cargo volumes are forecasted to reach 62 million tonnes in 2024.
“Amidst a world filled with numerous uncertainties, airlines persist in bolstering their profitability. The projected combined net profit of $30.5 billion by 2024 is a remarkable feat, especially considering the significant losses suffered during the recent pandemic. With an estimated five billion air travelers anticipated in 2024, the desire to fly has never been stronger. Additionally, the global economy heavily relies on air cargo to transport $8.3 trillion worth of trade to customers. Undoubtedly, aviation plays a crucial role in the aspirations and prosperity of individuals and economies. Enhancing airline profitability and cultivating financial resilience holds great significance. Profitability allows for investments in products that cater to our customers’ needs and in sustainable solutions necessary to achieve net zero carbon emissions by 2050,” stated Willie Walsh, the Director General of IATA.
“The airline industry is making progress towards achieving sustainable profits, but there is still a significant gap to bridge. With a return on invested capital of only 5.7%, which falls well below the cost of capital at over 9%, it is evident that our profits are quite meager. Earning just $6.14 per passenger further highlights the thin margins we operate on, barely enough to buy a cup of coffee in many parts of the world. In order to enhance profitability, it is crucial to address supply chain issues and ensure efficient deployment of our fleets to meet demand. Additionally, relief from burdensome regulations and ever-increasing tax proposals would greatly assist us. Prioritizing public policy measures that promote business competitiveness would not only benefit the economy, jobs, and connectivity, but also position us strongly to accelerate investments in sustainability,” added Walsh.
In 2024, the profitability of the industry is projected to strengthen as revenues outpace expenses, with a growth rate of 9.7% compared to 9.4% respectively. The estimated operating profits for that year are expected to reach $59.9 billion, reflecting a 14.7% increase from the estimated $52.2 billion in 2023. However, the growth rate of net profits is anticipated to be slightly slower at 11.3%, with an estimated increase from $27.4 billion in 2023 to $30.5 billion in 2024.
Furthermore, the industry is expected to achieve a significant milestone in 2024, with revenues reaching a historic high of $996 billion.
Specifically, passenger revenues are projected to reach $744 billion in 2024, indicating a 15.2% increase from the $646 billion recorded in 2023. The growth in revenue passenger kilometers (RPKs) is expected to be 11.6% year on year. Looking at the long-term trend, passenger demand is forecasted to grow at an annual rate of 3.8% for the period of 2023-2043.
