APAC leads global airline profit growth as industry eyes $30.5b in profits for 2024

The International Air Transport Association (IATA) has released a positive forecast for the global airline industry’s profitability in 2024, which also marks an improvement compared to the predictions made in June and December of 2023. 

However, the report also emphasises that the industry is still struggling to achieve returns above the cost of capital.

Snapshot of key financial projections for 2024:

  • Net profits: Expected to reach $30.5 billion, translating to a 3.1% net profit margin. This is up from an estimated $27.4 billion (3.0% net profit margin) for 2023 and the $25.7 billion (2.7% net profit margin) projected in December 2023. 
  • Return on invested capital: Forecasted at 5.7%, which is about 3.4 percentage points below the average cost of capital. 
  • Operating profits: Predicted to rise to $59.9 billion, compared to $52.2 billion in 2023. 
  • Total revenues: Anticipated to hit a record $996 billion, representing a 9.7% increase. 
  • Total expenses: Expected to reach $936 billion, a 9.4% rise. 
  • Total travellers: Projected to reach 4.96 billion, a record high. 
  • Air cargo volumes: Expected to total 62 million tonnes.

 

“In a world of many and growing uncertainties, airlines continue to shore up their profitability,” said Willie Walsh, IATA’s Director General. “The expected aggregate net profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses. With a record five billion air travelers expected in 2024, the human need to fly has never been stronger.”

 

Revenue and outlook drivers

  • Industry revenues are expected to reach a historic high of $996 billion in 2024. 
  • Passenger revenues are rojected to rise to $744 billion, a 15.2% increase from $646 billion in 2023. 
  • Revenue Passenger Kilometers (RPKs) are forecasted to grow by 11.6% year-on-year, with a long-term growth trend of 3.8% annually from 2023 to 2043. 
  • Passenger yields are expected to strengthen by 3.2% over 2023. 
  • Average Return Airfare, when measured in constant 2018 dollars, the average return airfare in 2024 is expected to be $252, down from $306 in 2019. 
  • Passenger Load Factor is anticipated to average 82.5%, close to pre-pandemic levels.

Air cargo market

  • Cargo revenues are expected to decline to $120 billion in 2024 from $138 billion in 2023, but remain above the pre-pandemic level of $101 billion in 2019. 
  • Cargo yields are forecasted to drop by 17.5% in 2024 but stay slightly above 2019 levels.

Expense management

  • Industry expenses are predicted to rise to $936 billion in 2024. 
  • Average fuel price is expected at $113.8 per barrel, resulting in a total fuel bill of $291 billion, accounting for 31% of operating costs. 
  • Sustainable Aviation Fuel (SAF) and its production is expected to cover 0.53% of global demand, with related costs at $3.75 billion. 
  • Non-fuel expenses are expected to remain controlled, with unit costs unchanged at 39 cents per available tonne kilometer (ATK). 
  • Labor Costs are also expected to improve by 2.4% to 12.9 cents/ATK, with total labor costs projected to grow by 7.6% to $214 billion.

Regional performance

According to IATA’s data, all regions are expected to generate profits for a second consecutive year, with Asia-Pacific airlines leading the growth:

  • North America continues as the largest profit contributor, driven by high passenger load factors and strong consumer spending. In 2024, passenger demand (RPK growth of 7%) and a strong load factor at 84% are expected to strengthen revenue development and operating profitability. Canada is seeing slower growth in traffic and greater wage pressure than the US market. 
  • Europe maintains a positive outlook despite challenges like supply chain issues and high interest rates. 
  • Asia-Pacific is anticipated to account for half of the world’s RPK growth, driven largely by recovering domestic markets in China, Japan, and Australia. International travel in the region remains subdued, especially in China, where it is still below the pre-COVID levels. This indicates that there is still a lot of pent-up demand for cross-border travel in the region, which will likely boost future growth prospects. 
  • Latin America is showing steady improvement. Countries in Central America, especially Mexico, El Salvador, Guatemala, and Honduras are key contributors to the region’s growth in profits.  
  • Middle East strongly benefits from robust economies and strategic hubs, with strong passenger and cargo volumes. Saudi Arabia’s massive investments in infrastructure and tourism are delivering robust growth in passenger and cargo volumes. Although airlines continue to add capacity, yields remain healthy and the demand for travel remains buoyant and looks set to continue apace. Geopolitical risks are the main threat, especially to the Levant carriers. The Gulf carriers are relatively less impacted unless tensions between Iran and Israel escalate. 
  • Africa faces high operational costs but maintains steady demand, supporting profitability.

Challenges and risks

IATA’s report emphasises that despite the positive outlook, the industry’s profitability remains fragile and susceptible to various risks, including:

  • Global economy: The airline industry’s prospects are closely linked to global economic trends. 
  • China’s economy: Slowing growth and structural changes in China could have significant impacts. 
  • Geopolitical factors: Conflicts like the Russia-Ukraine war and Israel-Hamas tensions pose potential threats. 
  • Supply chain issues: Persistent delays and maintenance problems affect capacity expansion and fleet renewal. 
  • Regulatory pressures: Rising compliance costs and political shifts could impact financial health. 
  • Public policy: With more people going to the polls than in any other year, 2024 has the potential to shift the global political landscape. A political shift away from global institutions, international trade, and policy paralysis from polarized politics would likely be detrimental. Further, as airlines redouble their decarbonization efforts, any slipping in the political determination to reach net zero carbon emissions by 2050 could risk the policy support that airlines need to achieve this important goal.

Passenger perspectives

IATA’s April 2024 poll revealed high passenger satisfaction, with 97% of travellers satisfied with their experiences and 91% recognising the critical economic role of air travel. A significant majority believe in the industry’s commitment to achieving net zero carbon emissions by 2050, with 82% supporting this goal.

Overall, the global airline industry is on a path to recovery and profitability, driven by strong demand and effective expense management. However, as IATA points out in their report, achieving sustainable profits that exceed the cost of capital remains a challenge. Addressing supply chain issues, regulatory pressures, and geopolitical risks will be crucial for the industry’s continued growth.

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