IATA has 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.

Highlights of IATA’s outlook for 2024 include:

• Nett profits are expected to reach $30.5 billion in 2024 (3.1% nett profit margin). That will be an improvement on 2023 nett profits which are estimated to be $27.4 billion (3% nett profit margin). It is also an improvement on the $25.7 billion (2.7% nett profit margin) forecast for 2024 profits that IATA released in December 2023.
• Return on invested capital in 2024 is expected to be 5.7%, which is about 3.4 percentage points 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.
• Total expenses are expected to reach $936 billion (+9.4%) in 2024 – a record high.
• Total travellers are expected to reach 4.96 billion in 2024 – a record high.

“In a world of many and growing uncertainties, airlines continue to shore up their profitability. The expected aggregate nett profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses. With a record five billion air travellers expected in 2024, the human need to fly has never been stronger. Profitability enables investments in products to meet the needs of our customers and in the sustainability solutions we will need to achieve nett-zero carbon emissions by 2050,” said Willie Walsh, IATA Director General. 

Walsh noted that the airline industry was on the path to sustainable profits, but there was a big gap still to cover.

“A 5.7% return on invested capital is well below the cost of capital, which is over 9%. And earning just $6.14 per passenger is an indication of just how thin our profits are – barely enough for a coffee in many parts of the world. To improve profitability, resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand. And relief from the parade of onerous regulations and ever-increasing tax proposals would also help.

“An emphasis on public policy measures that drive business competitiveness would be a win for the economy, jobs, and connectivity. It would also place us in a strong position to accelerate investments in sustainability,” said Walsh.

Outlook drivers

Profitability is expected to strengthen in 2024 as revenues grow slightly faster than expenses (+9.7% vs. +9.4% respectively). Operating profits are expected to reach $59.9 billion (+14.7% from $52.2 billion estimated for 2023).

Nett profits, however, are expected to grow slightly more slowly at +11.3%, from $27.4 billion estimated for 2023 to $30.5 billion estimated for 2024.

Revenue

Industry revenues are expected to reach an historic high of $996 billion in 2024. 

Passenger revenues are expected to reach $744 billion in 2024, up 15.2% from $646 billion in 2023. Revenue passenger kilometres (RPKs) growth is expected to be 11.6% year-on-year. The long-term 20-year growth trend is expected to see passenger demand grow 3.8% annually for the 2023-2043 period.

Load factor

The average passenger load factor is expected to be 82.5% in 2024. This is largely in line with pre-pandemic levels (82.6% in 2019) and reflects tight supply and demand conditions from ongoing supply chain issues for aircraft and engines. 

Risks

Industry profitability is fragile and could be affected positively or negatively by many factors such as global economic developments, the operational impact of the Russia-Ukraine war and the Israel-Hamas war, supply chain issues, regulatory risks, and public policies.

Africa

Africa has a high operational cost base and a low propensity to spend on air travel. Moreover, connectivity challenges dampen the industry’s expansion and performance.

Despite these headwinds, there is sustained demand for air travel, which should allow the market to deliver a second year of profitability.