Airlines set to earn 2.7% net profit margin on record revenues in 2024
The International Air Transport Association (IATA) announced strengthened profitability projections for airlines in 2023, which will then largely stabilize in 2024. However, net profitability at the global level is expected to be well below the cost of capital in both years.
Airline industry net profits are expected to reach $25.7 billion in 2024 (2.7% net profit margin). That will be a slight improvement over 2023 which is expected to show a $23.3 billion net profit (2.6% net profit margin).
Overall revenues in 2024 are expected to rise faster than expenses (7.6% vs. 6.9%), strengthening profitability. While operating profits are expected to increase by 21.1% ($40.7 billion in 2023 to $49.3 billion in 2024), net profit margins increased at less than half the pace (10%) largely due to increased interest rates expected in 2024.
Industry revenues are expected to reach an historic high of $964 billion in 2024. An inventory of 40.1 million flights is expected to be available in 2024, exceeding the 2019 level of 38.9 million and up from the 36.8 million flights expected in 2023.
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Passenger revenues are expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 9.8% year on year. While that is more than double the pre-pandemic growth trend, 2024 is expected to mark the end of the dramatic year-on-year increases that have been characteristic of the recovery in 2021-2023.
The high demand for travel coupled with limited capacity due to persistent supply chain issues continues to create supply and demand conditions supporting yield growth. Passenger yields in 2024 are expected to improve by 1.8% compared to 2023.
Some 4.7 billion people are expected to travel in 2024, an historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019. Cargo volumes to be 58 and 61 million tonnes in 2023 and 2024, respectively.
Cargo revenues are expected to fall to $111 billion in 2024. That is down sharply from an extraordinary peak of $210 billion in 2021, but it is above 2019 revenues which were $101 billion. Yields will continue to be negatively impacted by the continued growth of belly capacity (related to strong growth on the passenger side of the business) while international trade stagnates. Yields are expected to further correct towards pre-pandemic levels with a -32.2% decline in 2023 followed by a -20.9% decline expected in 2024. They will remain high by historical standards, however.
“Considering the major losses of recent years, the $25.7 billion 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,” said Willie Walsh, IATA’s Director General.
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