The International Air Transport Association (IATA) has unveiled a brighter forecast for global airlines in 2023, signaling a positive trajectory with expectations of continued stabilisation in 2024.
However, caution prevails as the net profitability of the industry is forecasted to consistently lag behind the cost of capital during both years, with substantial variations in financial performance across regions.
Forecasts indicate that net profits are poised to rise to $25.7 billion in 2024, reflecting a marginal improvement from the expected $23.3 billion in 2023, with net profit margins projected at 2.7 percent for the former and 2.6 percent for the latter.
The return on invested capital is expected to trail the cost of capital by four percentage points in both 2023 and 2024, primarily due to the global increase in interest rates responding to inflationary pressures.
Operating profits are anticipated to experience a positive trajectory, surging from $40.7 billion in 2023 to $49.3 billion in 2024.
Total revenues are expected to reach a historic high of $964 billion in 2024, representing a 7.6 percent year-over-year increase.
Conversely, expenses are projected to grow at a slightly lower rate of 6.9 percent, totaling $914 billion in 2024.
The passenger travel sector is poised for a historic high in 2024, with an estimated 4.7 billion travelers, surpassing the pre-pandemic level of 4.5 billion recorded in 2019.
Cargo volumes are predicted to reach 58 million tonnes in 2023 and 61 million tonnes in 2024.
Willie Walsh, Director General of IATA, expressed a measured sense of optimism, acknowledging the industry’s resilience in the face of recent losses.
However, he stressed the need for perspective, underscoring that the projected net profit margin of 2.7 percent falls considerably below acceptable levels in other industries.
Driving these forecasts, industry revenues are expected to outpace expenses, with a 7.6 percent increase in 2024.
Flight inventory is predicted to rise to 40.1 million flights, exceeding the pre-pandemic level of 38.9 million in 2019. Passenger revenues are expected to reach $717 billion in 2024, reflecting a 12 percent increase from 2023.
Cargo revenues, on the other hand, are projected to decrease to $111 billion in 2024, down from the 2021 peak of $210 billion but surpassing 2019 levels.
Fuel costs are expected to account for 31 percent of operating costs, with an average fuel price of $113.8 per barrel in 2024.
gandae@businessdayafrica.org