Airline industry operating profits are expected to reach $49.3 billion in 2024 from $40.7 billion in 2023.
Total revenues in 2024 are expected to grow 7.6% year over year to a record $964 billion.
Expense growth is expected to be slightly lower at 6.9% for a total of $914 billion.
Some 4.7 billion people are expected to travel in 2024, an all-time high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019.
Cargo volumes are expected to be 58 and 61 million tons in 2023 and 2024, respectively.
"Given the significant 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 return strongly to pre-pandemic levels of connectivity. The speed of recovery has been extraordinary; however, it also appears that the pandemic has cost aviation about four years of growth. From 2024 onwards, the outlook indicates that we can expect more normal growth patterns for both passengers and cargo," said Willie Walsh, IATA Director General.
"Industry earnings need to be put in proper perspective. While the recovery is impressive, a net profit margin of 2.7% is well 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 only $5.45 per passenger carried. That's enough to buy a basic 'grande latte' at a London Starbucks. But it is too little to build a future that is resilient to crises for a critical global industry on which 3.5% of GDP depends and from which 3.05 million people directly earn a living. Airlines will always compete fiercely for their customers, but they remain too burdened by onerous regulations, fragmentation, high infrastructure costs and a supply chain populated by oligopolies," Walsh said.
Outlook drivers
Overall revenue in 2024 is expected to grow faster than expenses (7.6% vs. 6.9%), strengthening profitability. While operating earnings are expected to increase by 21.1% (from $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 expected interest rate hikes in 2024.
Revenue: Industry revenue is expected to reach an all-time high of $964 billion in 2024. An inventory of 40.1 million flights is expected to be available in 2024, exceeding 2019's level of 38.9 million and above the 36.8 million flights expected in 2023.
Passenger revenues are expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue passenger-kilometer (RPK) growth is expected to be 9.8% year-on-year. While this is more than double the pre-pandemic growth trend, 2024 is expected to mark the end of the dramatic year-over-year increases that have been characteristic of the recovery in 2021-2023.
High travel demand, coupled with constrained capacity due to persistent supply chain issues, continues to create supply and demand conditions that support yield growth. Passenger throughput in 2024 is expected to improve by 1.8% compared to 2023.
Reflecting tight supply and demand conditions, efficiency levels are high and load factor is expected to be 82.6% in 2024, slightly better than in 2023 (82%) and the same as in 2019.
IATA passenger survey data from November 2023 supports the optimistic outlook.
One-third of travelers surveyed say they travel more than before the pandemic. Some 49% indicate that their travel habits are now similar to those before the pandemic. Only 18% said they were traveling less.
Looking ahead, 44% say they will travel more in the next 12 months than in the previous 12 months. Only 7% say they will travel less and 48% expect to maintain similar levels of travel in the next 12 months as in the previous 12 months.
Freight revenues are expected to fall to $111 billion in 2024. This is well below an extraordinary peak of $210 billion in 2021, but above 2019 revenues of $101 billion. Yields will continue to be negatively impacted by continued growth in cabin capacity (related to strong growth on the passenger side of the business) as international trade stagnates. Yields are expected to continue to correct toward pre-pandemic levels, with a -32.2% drop in 2023, followed by an expected -20.9% drop in 2024. However, they will remain high by historical standards.
It should be noted that the progression of profitability has been extraordinary in recent years (-8.2% in 2019, +54.7% in 2020, +25.9% in 2021, +7% in 2022, -32.2% in 2023).
Expenditures: expected to grow to $914 billion in 2024 (+6.9% in 2023 and +15.1% in 2019).
Fuel prices are expected to average $113.8 per barrel (jet) in 2024, resulting in a total fuel bill of $281 billion, representing 31% of all operating costs. Airlines are expected to consume 99 billion gallons of fuel in 2024.
High crude oil prices are expected to continue to be further exaggerated for airlines, as the crack spread (premium paid to refine crude oil into jet fuel) is expected to average 30% by 2024.
The industry's CO2 emissions in 2024 are expected to be 939 million tons due to the consumption of 99 billion gallons of fuel.
The aviation industry will increase the use of sustainable aviation fuels (SAF) and carbon credits to reduce its carbon footprint. We estimate that SAF production could increase to 0.53% of total airline fuel consumption by 2024, adding $2.4 billion to next year's fuel bill. In addition, the Carbon Reduction and Offsetting Scheme for International Aviation (CORSIA) is a global market-based carbon offsetting mechanism designed to stabilize emissions from international aviation. CORSIA-related costs are estimated at $1 billion in 2024.
Airlines have controlled non-fuel costs relatively well despite inflationary pressures. As fixed costs are spread over a larger scale of activity as the industry recovers from the pandemic, non-fuel unit costs are falling in line with the pre-pandemic level. In 2024, we expect non-fuel unit costs of 39.2 cents per available tonne-kilometer (ATK), which is 1.6% above 2023 levels and in line with 2019 levels. Total non-fuel costs are expected to reach $633 billion in 2024.
Risks
Industry profitability is fragile and could be affected (positively or negatively) by many factors:
Global economic developments: lower inflation, low unemployment rates and strong travel demand are positive developments. However, economic tensions could emerge. In China, for example, slow growth, high youth unemployment and disorderly real estate markets, if not properly managed, could affect overall economic cycles.
Similarly, if tolerance for high interest rates weakens and unemployment rises significantly, the strong consumer demand that has supported the recovery could weaken.
War: The operational impacts of the war in Ukraine and the war between Israel and Hamas have largely been limited to diversions due to airspace closures. On the cost side, the conflicts have driven up oil prices, which is affecting airlines globally. An unexpected peace in either or both cases would bring benefits to the industry, but any escalation could produce a radically different global economic scenario to which aviation would not be immune.
Supply chains: Supply chain issues continue to affect global trade and business. Airlines have been directly affected by unforeseen maintenance issues on some aircraft and engine types, as well as delays in the delivery of spare parts and aircraft, limiting capacity expansion and fleet renewal.
Regulatory risk: On the regulatory front, airlines could face increasing compliance costs and additional costs related to passenger rights regimes, regional environmental initiatives and accessibility requirements.
Regional Summary
Regions have recovered from the pandemic at different speeds. Regionally, North America, Europe and the Middle East are expected to post net gains in 2023. Asia Pacific will join the group in 2024, but we still expect Latin America and Africa to be in the red in 2024.
North America remains the standout region in terms of financial performance. It was the first market to return to profitability in 2022 and built on this performance in 2023 by delivering efficiencies, particularly in high passenger load factors. Consumer spending has remained solid, despite cost-of-living pressures, and demand for air travel remains robust and is expected to outpace capacity growth in 2024.
Europe
Europe is expected to end 2023 with stronger than expected performance, despite various capacity issues and supply constraints. With strong demand for air travel expected to continue in 2024, net profit is expected to strengthen marginally. Key risks to the region's performance relate to the tight labor market and war in Ukraine and the Middle East.
Asia Pacific
While some of the region's major domestic markets (China, Australia and India) recovered quickly from the pandemic, international travel to and from the region was subdued, as China removed the last of its restrictions on international travel only in mid-2023. China's international travel remains 40% below pre-pandemic levels. The region is expected to record a small loss in 2023 and make gains in 2024.
Latin America
While some markets are strong (Mexico, for example), others are facing economic and social turmoil that is negatively impacting airline performance. With capacity growth expected to outpace demand growth in 2024, market conditions are expected to remain challenging. Overall, the Latin America region is expected to be in the red by both 2023 and 2024, albeit with declining losses.
Middle East
The Middle East is expected to deliver strong financial performance in both 2023 and 2024. Operators in the Middle East have rushed to rebuild their international networks and restore their superconnector hubs. To that end, capacity is expected to grow faster than demand in 2024; however, with more efficient fleets, the net profit margin has potential to increase slightly.
Africa
African airlines are expected to generate losses in both 2023 and 2024. The continent remains a difficult market to operate an airline, with economic, infrastructure and connectivity challenges affecting industry performance. Despite these challenges, there is strong demand for air travel. Supported by this demand, the industry continues to reduce losses.
2023
Airline profitability for 2023 performed better than expected in IATA's June outlook. Revenues for 2023 are now expected to reach $896 billion ($93 billion higher than expected). Expenses also grew to $855 billion ($74 billion higher than the previous forecast). That translated into an industry-wide net gain of $23.3 billion. While that figure is significantly above the $9.8 billion forecast in June, the additional profit of $13.5 billion equates to just 1.4% of revenue. The net profit margin is just 2.6%, meaning airlines will have earned an average of $5.44 per passenger carried by 2023.
The improvement was driven entirely by the passenger business, which experienced a revenue increase compared to the previous forecast of $96 billion to $642 billion. Cargo revenue in 2023 was $134.7 billion, underperforming the $142.3 billion expected in June.
The traveler's point of view
Air travel continues to bring value to consumers. A recent public opinion survey (14 countries, 6,500 respondents who have taken at least one trip in the past year) revealed that 97% of travelers expressed satisfaction with their trip. In addition, 88% agreed that air travel improves their lives and 80% agreed that air travel is good value for money.
Consumers can expect airfares to continue to increase costs, particularly oil. However, IATA data shows that competition continues to drive price benefits for consumers. The average round-trip real airfare in 2023 is expected to be $254, 20% lower than the average fare of $315 in 2019 (measured in constant 2018 dollars).
Passengers are counting on a safe, sustainable, efficient and cost-effective airline industry. IATA's public opinion surveys demonstrated the important role travelers see the airline industry playing:
89% agreed that air travel is a necessity for modern life. 89% agreed that air connectivity is critical to the economy. 88% said air travel has a positive impact on societies and 83% said the global air transport network is a key contributor. to the UN Sustainable Development Goals (SDGs).
Aviation remains committed to its goal of achieving net zero emissions by 2050. Travelers express high levels of confidence in this commitment: 84% believe it is the right goal and 79% say we will. be able to fly sustainably, and 78% agree that aviation leaders are taking the climate challenge seriously.
