Airlines to earn 2.7% net profit margin on record revenue in 2024
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The International Air Transport Association (IATA) has announced strengthened profitability projections for airlines in 2023, which will then largely stabilize in 2024.
However, global net profitability is expected to be well below the cost of capital in both years. Very significant regional variations in financial performance persist.
According IATA, the airline industry’s net profits are expected to reach $25.7 billion in 2024 (net profit margin of 2.7%). This is a slight improvement over 2023, which is expected to show a net profit of $23.3 billion (a net profit margin of 2.6%).
In both 2023 and 2024, the return on invested capital will be 4 percentage points behind the cost of capital, as interest rates around the world have risen in response to strong inflationary momentum. Airline industry operating profits are expected to reach $49.3 billion in 2024 from $40.7 billion in 2023. Total revenue in 2024 is expected to grow 7.6% year-over-year to a record $964 billion of dollars. Spending growth is expected to be slightly lower at 6.9%, for a total of $914 billion.
Some 4.7 billion people are expected to travel in 2024, an all-time high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019. Cargo volumes are expected to be 58 and 61 million tons in 2023 and 2024, respectively.
“Taking into account significant losses in recent years, the net profit of $25.7 billion expected in 2024 is a tribute to aviation’s resilience. People love to travel and that has helped airlines return strongly to pre-pandemic levels of connectivity. The speed of recovery has been extraordinary; However, it also appears that the pandemic has cost aviation about four years of growth. From 2024 onwards, the outlook indicates that we can expect more normal growth patterns for both passengers and cargo.”
saying Willie Walsh, Director General of IATA.
“Industry profits need to be put into proper perspective. While the recovery is impressive, a net profit margin of 2.7% is well 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 only $5.45 for each passenger carried. That’s enough to buy a basic ‘grande latte’ at a Starbucks in London. But it is too little to build a future that is resilient to crises for a critical global industry on which 3.5% of GDP depends and on which 3.05 million people directly earn their living. “Airlines will always compete fiercely for their customers, but they remain overly burdened by onerous regulations, fragmentation, high infrastructure costs and a supply chain populated by oligopolies.”
saying Walsh.
In 2024, overall revenue is expected to grow faster than expenses (7.6% vs. 6.9%), strengthening profitability. While operating profits are expected to increase 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%), in largely due to the increase in interest rates expected in 2024.
Income
Industry revenue is expected to reach an all-time high of $964 billion in 2024. An inventory of 40.1 million flights is expected to be available in 2024, surpassing 2019’s level of 38.9 million and above the 36.8 million flights expected in 2023.
Passenger revenue is expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue passenger kilometers (RPK) growth is expected to be 9%. 8% year-on-year. While this is more than double the pre-pandemic growth trend, 2024 is expected to mark the end of the dramatic year-on-year increases that have been characteristic of the recovery in 2021-2023.
High travel demand, coupled with limited capacity due to persistent supply chain issues, continues to create supply and demand conditions that support yield growth. Passenger throughput in 2024 is expected to improve by 1.8% compared to 2023.
Reflecting tight supply and demand conditions, efficiency levels are high and load factor is expected to be 82.6% in 2024, slightly better than 2023 (82%) and the same as 2019.
News source: Emirates News Agency
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