The International Air Transport Association has improved its 2024 airline profitability outlook compared with its most recent forecast in December 2023, the association announced this week during its Annual General Meeting and World Air Transport Summit in Dubai. The association also updated its estimates for 2023.
Total 2024 revenues are projected to reach $996 billion, up 9.7 percent from the $908 billion estimated for 2023 and a record high, according to IATA. Expenses, however, also are forecast to reach a record high, at $936 billion, a 9.4 percent increase compared with 2023 estimates.
Operating profits in 2024 are projected to reach $59.9 billion, up from an estimate of $52.2 billion in 2023, while net airline profits for the year are forecast to reach $30.5 billion, up from the $27.4 billion forecast for 2023 and the $25.7 billion estimated for 2024 in the association's December 2023 forecast. Total 2024 travelers are expected to reach 4.96 billion, another record high.
The projected 2024 net profit of $30.5 billion would be "not a record, unfortunately, and represents a net margin of just over 3 percent," IATA director general Willie Walsh said. "But considering where we were just a few years ago, it is a major achievement."
Still, IATA reported that airline earnings average to about $6.14 per passenger. "[This figure] is an indication of just how thin our profits are—barely enough for a coffee in many parts of the world," Walsh said.
"Revenue growth is coming from the passenger side," said Marie Owens Thomsen, IATA senior VP of sustainability and chief economist. Traffic in 2024 is forecast to grow an estimated 10.4 percent year over year, while capacity, measured in revenue passenger kilometers, is projected to increase 11.6 percent.
"This is because people are not only traveling, they also now are starting to increase the length of their journeys again," Thomsen said. "So, we're outpacing [gross domestic product] growth," which she said was projected to average 3.2 percent globally for 2023, 2024 and 2025.
Passenger revenue in 2024 is projected to reach $744 billion, up 15.2 percent year over year, according to IATA. Passenger yield is anticipated to strengthen 3.2 percent compared with 2023, which is down from the 8.1 percent increase in 2023. The average passenger load factor is forecast to be 82.5 percent.
The latter is "largely in line with pre-pandemic levels of 82.6 percent in 2019 and reflects tight supply and demand conditions from ongoing supply chain issues for aircraft and engines," according to IATA.
Regional Performance Projections
North America 2024 demand is projected to increase 7 percent year over year with capacity up 8.1 percent for a net profit of $14.8 billion, which is in line with the 2023 profit estimate. The region "continues to be the most significant factor to industry profits, supported by a high passenger load factor, robust yields and strong consumer spending, despite cost-of-living pressure," according to IATA.
Europe also has a positive 2024 outlook, with demand projected to be up 11.1 percent compared with 2023 and capacity up 11.5 percent, for a net profit of $9 billion, up slightly from the estimated $8.6 billion a year prior. Potential challenges are supply chain issues, high interest rates and the risk of labor disputes.
Asia-Pacific is expected to account for half of the world's demand growth in 2024, driven largely by recovering domestic markets in China, Japan and Australia, according to IATA. The region's projected traffic increase for the year is 17.1 percent, with capacity up 14.1 percent versus 2023 for about $2.2 billion in net profit. Its 2023 estimated net profit is about $600 million.
Exceeding Asia-Pacific's net profit forecast is the Middle East, at $3.8 billion, up from the $3.1 billion estimated for 2023, aided by " the strength of both the region's economies and its global hubs," according to IATA. The United Arab Emirates continues to benefit from its attractiveness to both leisure and business travelers, according to IATA, while Saudi Arabia's "massive investments" in infrastructure and tourism are delivering robust growth in passenger and cargo volumes.
Latin America ($600 million) and Africa ($100 million) account for the remainder of the 2024 profit projections. The former has seen a steady improvement in financial performance since 2020, according to IATA. The latter has a high operational cost base and a low propensity to spend on air travel, but there is sustained demand for air travel, "which should allow the market to deliver a second year of profitability."
Risk Factors
A key risk factor to any projection is global economic performance, according to IATA. While the airline sector historically has been linked closely to global economic trends, it also largely has been resilient in the face of inflation, high interest rates and slowing GDP growth in the post-pandemic period. Still, economic developments in China "should be closely watched," with IATA citing slowing growth, youth unemployment and the relative strength of the service sector over manufacturing as "indications that China's economy is in transition."
Conflicts also could be a factor. The wars in Ukraine and Gaza have remained "largely limited" to their regions, but an escalation of either conflict negatively could shift the airline sector's economic outlook.
Supply chain woes continue, with maintenance issues on some aircraft and engine types, and delays in the delivery of aircraft parts and of aircraft.
"It's the cause of quite a lot of frustration in the industry," Walsh said. "Many airlines see opportunities to expand their networks and provide services to new destinations, and they can't. It's also caused some airlines to keep in service aircraft that they had planned to retire. And in some cases, they will bring back into service aircraft that they had announced they were retiring. All of this is not helping our journey to net zero. But there is nothing any individual airline can do. We have to wait for the [original equipment manufacturers] to sort out the challenges that they face and start serving the industry properly."
There also are regulatory and public policy risks. Airlines could face rising costs of compliance, passenger rights, regional environmental and accessibility initiatives. Walsh noted that the European Union's Air Passengers Rights Regulation, known as EU 261, "is not fit for purpose. … And copycat regulations are cropping up in whack-a-mole fashion in Asia, the Middle East, the U.S. and Canada."
These proposals are meant to help travelers, but will only drive up costs, IATA regional VP of the Americas Peter Cerdá said, noting the U.S. Department of Transportation's recent rule regarding airlines providing automatic refunds for certain delays or cancellations "irrespective of the cause of the disruption."