IATA: Airlines set to earn 2.7% net profit margin on record revenues in 2024

The International Air Transport Association (IATA) has announced strengthened profitability projections for airlines this year, which will then largely stabilise in 2024.

However, net profitability at the global level is expected to be well below the cost of capital in both years, whilst very significant regional variations in financial performance remain.

In a forecast published last week, IATA projected that airline industry net profits are expected to reach $25.7b in 2024 (a net profit margin of 2.7 per cent) – a slight improvement over 2023 which is expected to show a $23.3b net profit (2.6 per cent net profit margin).

The association also expects airline industry operating profits to reach $49.3b in 2024 from $40.7b in 2023, as total revenues are expected to grow 7.6 per cent year over year in 2024 to a record $964b. Meanwhile, expense growth is projected to be slightly lower next year at 6.9 per cent for a total of $914b.

Willie Walsh, director general of IATA, said: “Considering the major losses of recent years, the $25.7b 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 [travel].”

IATA forecasts that some 4.7b people are expected to travel in 2024, a historic high that exceeds the pre-pandemic level of 4.5b recorded in 2019.

Meanwhile, growth is anticipated for the air cargo sector with cargo volumes projected to increase from 58m this year to 61m in 2024.

Walsh added: “Industry profits must be put into proper perspective. While the recovery is impressive, a net profit margin of 2.7 per cent 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 per cent of GDP depends and from which 3.05m 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.”

According to IATA, passenger revenues are also set to rise by 12 per cent to $717b in 2024 from $642b this year – more than double the pre-pandemic growth trend. But 2024 is expected to spell an end to the “dramatic” year-on-year increases seen post-Covid.