According to IATA, airlines would have a 2.7% net profit margin on record revenues in 2024
Airline profitability is expected to increase in 2023 and then stabilize in 2024, according to the International Air Transport Association (IATA).
Nonetheless, in both years, net profitability globally is anticipated to be significantly lower than the cost of capital. There are still quite big differences in financial success between regions.
IATA’s outlook highlights are as follows:
- In 2024, net profits from the airline sector are projected to be $25.7 billion, with a 2.7% net profit margin. That represents a minor improvement over 2023, when a net profit of $23.3 billion (2.6% net profit margin) is anticipated.
- The return on invested capital is expected to trail the cost of capital by 4 percentage points in 2023 and 2024 due to global interest rates rising in reaction to the strong inflationary drive.
- Operating profits for the airline sector are predicted to increase from $40.7 billion in 2023 to $49.3 billion in 2024.
- It is projected that total revenues would reach a record $964 billion in 2024, an increase of 7.6% annually.
- A little slower rate of 6.9% expense growth is anticipated, totaling $914 billion.
- In 2024, it is anticipated that 4.7 billion individuals would travel, a record high that surpasses the 4.5 billion pre-pandemic figure that was noted in 2019.
- In 2023 and 2024, respectively, cargo volumes are projected to be 58 and 61 million tonnes.
“Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience. People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity. The speed of the recovery has been extraordinary; yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo,” said Willie Walsh, IATA’s Director General.
“Industry profits must be put into proper perspective. 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. 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.
Outlook Drivers
According to IATA, overall revenues are predicted to increase in 2024 at a higher rate than expenses (7.6% vs. 6.9%), which will boost profitability. Net profit margins grew at less than half the speed (10%) of operating profits, which are predicted to climb by 21.1% ($40.7 billion in 2023 to $49.3 billion in 2024), mostly because of higher borrowing rates anticipated in 2024.
Revenue:
In 2024, industry revenues are predicted to hit a record $964 billion. It is anticipated that there would be 40.1 million flights available in 2024, up from the 36.8 million flights anticipated in 2023 and above the 38.9 million flights in 2019.
- Revenues from passengers are predicted to increase by 12% to $717 billion in 2024 from $642 billion in 2023. It is anticipated that revenue passenger kilometers (RPKs) will increase by 9.8% annually. Even if that is more than twice the growth tendency prior to the pandemic, the recovery in 2021–2023 is anticipated to come to a stop in 2024 with the sharp annual increases.
- There is a strong demand for travel, but there is also a restricted supply due to ongoing problems in the supply chain, which means that yield growth is supported by supply and demand. It is anticipated that passenger yields in 2024 will increase by 1.8% over 2023.
- Efficiency levels are high due to the tight supply and demand conditions; in 2024, the load factor is predicted to be 82.6%, which is a little better than in 2023 (82%) and the same as in 2019. Data from IATA‘s November 2023 passenger survey confirms the positive prediction.
- Thirty percent of passengers claim to be traveling more now than they were before the outbreak. About 49% of respondents say they travel in the same way as they did before the outbreak. Merely 18% reported reducing their trip frequency.
- 44% of respondents predict that they will travel more in the upcoming year than they did in the previous one. Just 7% of respondents said they would travel less, while 48% anticipate continuing to travel at the same pace as they did the year before.
- By 2024, cargo receipts are projected to drop to $111 billion. Although it is significantly less than the remarkable peak of $210 billion in 2021, the revenues for 2019 are still higher than $101 billion. While foreign trade stagnates, belly capacity growth (linked to robust growth on the passenger side of the business) will continue to negatively influence yields. Yields are predicted to drop by -32.2% in 2023 and -20.9% in 2024, respectively, as they continue to trend downward toward pre-pandemic levels. Still, by historical standards, they will remain high. Keep in mind that the yield has increased extraordinarily over the past few years (8.2% in 2019, +54.7% in 2020, +25.9% in 2021, +7% in 2022, -32.2% in 2023). Expenses are projected to increase by 6.9% in 2023 and 15.1% in 2019 to $914 billion in 2024.
- In 2024, the average price of fuel (jet) is predicted to be $113.8/barrel, which would result in a fuel bill of $281 billion, or 31% of all operational costs. In 2024, it is anticipated that airlines would use 99 billion gallons of fuel.
The crack spread—the premium paid to refine crude oil into jet fuel—is predicted to average 30% in 2024, meaning that high crude oil prices will likely continue to be exaggerated for airlines. With 99 billion gallons of petroleum consumed, industry CO2 emissions are predicted to reach 939 million tonnes in 2024.
To lessen its carbon footprint, the aviation sector will utilize more carbon credits and Sustainable Aviation Fuels (SAF). According to our estimates, SAF production might increase to 0.53% of the fuel used by aircraft globally in 2024, resulting in a USD 2.4 billion increase in fuel costs. Moreover, a global market-based carbon offsetting system called the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) was created to stabilize emissions from international aviation. In 2024, the expected cost of CORSIA-related expenses is $1 billion.
IATA found that industry profitability is brittle and subject to a variety of influences, both favorable and unfavorable:
Global economic developments:
War:
Regulatory Risk:
Achievements 2023
According to IATA’s June projection, airline profitability for 2023 performed better than anticipated. It is now anticipated that revenues in 2023 will total $896 billion, which is $93 billion more than anticipated. Additionally, costs increased to $855 billion, or $74 billion more than anticipated. That resulted in a net profit of $23.3 billion for the entire sector. Even while that is much more than the $9.8 billion estimate from June, the extra $13.5 billion in profit only represents 1.4% of sales. There is only a 2.6% net profit margin.
Indicating that in 2023 airlines will have made $5.44 on average for each passenger they carry.
The passenger business, whose revenues increased by $96 billion to $642 billion in comparison to the prior estimate, was the sole driver of the rise. 2023 cargo receipts came in at $134.7 billion, less than the $142.3 billion that was projected in June.
Viewpoints of customer
Consumers continue to benefit from air travel. According to a recent public opinion survey, 97% of travelers who have traveled at least once in the past year—representing 14 nations and 6,500 respondents—expressed pleasure with their travel experiences. Additionally, 88% of respondents said that flying improves their lives, and 80% said that flying offers good value for money.
Travelers should anticipate that airfares will keep up with growing expenses, especially those of oil. Nonetheless, IATA data indicates that consumer price benefits are still being driven by competition. When measured in constant 2018 dollars, the average real return air cost in 2023 is projected to be $254, which is 20% less than the average fare of $315 in 2019.
Customers rely on an airline sector that is profitable, sustainable, safe, and efficient. IATA public opinion surveys revealed the significant role that travelers perceive the airline sector to play:
89% of respondents said that travel by air is essential to modern living.
89% concurred that having access to the air is essential for the economy.
88% of respondents stated that air travel benefits societies, and 83% stated that the UN Sustainable Development Goals (SDGs) are significantly aided by the global air transport network.
The aviation industry is steadfast in its pursuit of net zero emissions by 2050. High levels of trust are being expressed by travelers in this commitment; 84% think it is the correct objective, 79% think we will be able to fly sustainably, and 78% concur that aviation leaders are genuinely addressing the climate crisis.