PUBLISHED : 31 Oct 2024 at 04:00
Rising supply chain costs still hamper the aviation industry, even though airlines should benefit from cheaper oil prices until next year, according to the International Air Transport Association (IATA).
Marie Owens Thomsen, senior vice-president of sustainability and chief economist at IATA, said the profitability of airlines next year should improve, thanks to lower oil and jet fuel prices.
IATA forecast the global airline average net profit this year at a 3.1% margin, or US$6.14 per passenger, exceeding the 2019 level of a 3.1% net margin and $5.80 per passenger.
The maximum net profit margin the industry previously witnessed was 5-6%.
The global oil price has dropped significantly to less than $80 per barrel, which is positive for the global economy and aviation, said Ms Thomsen.
Although the oil market is among the world’s most sensitive markets and will be very volatile, attributed to factors like geopolitical conflict and the US election, its price has shown a slower trend.
This movement is majorly attributed to large countries, such as China, shifting their policies from diesel to adopt liquified natural gas for truck transportation.
The oversupply of oil production in the US also drives the trend. The price of jet fuel used by airlines has fallen, following the decline in crude oil prices. A total of 30% of an airline’s expenses are derived from the fuel price.
However, the aviation industry is now facing other rising costs instead, including higher labour, maintenance and parts, and is also challenged by supply chain disruption.
Airlines have remained indebted since the pandemic, which would take a couple of years before turning into higher profits, Ms Thomsen added.
As a result, these led to net profit margins improving at a smaller rate than the drop in the oil price.
IATA held the World Financial Symposium and the World Passenger Symposium in Bangkok on Oct 30-31.
According to IATA, Thailand’s passenger numbers should have an annual growth rate of 3.88% between 2024 and 2043, while its passenger demand has already reached 88% of the 2019 level.
IATA also said Thailand is well positioned to become a top 15 global market for aviation in the next two decades.
Prior to the pandemic, 84% of tourists visited Thailand by air, while the aviation business contributed over 7.4% of the country’s GDP.
IATA said that instead of introducing a tourism tax, which would hamper passenger demand, the government should look for other ways to grow the tourism sector.