The International Air Transport Association (IATA) expects the aviation industry’s net profits to reach $23.3 billion (21.5 billion euros) in 2023 and to $25.7 billion (23.5 billion euros) in 2024. 8 billion euros) will rise The effects of the Covid-19 crisis emerge from the annual report presented in Geneva on Wednesday. This means airlines are emerging from three dark years, with record losses in 2020 of $137 billion; 42,000 million in 2021 and 6,900 million in the red in 2022. However, they are still far from pre-pandemic levels, when in 2019 they reached a record profit of 29,300 million dollars (27,160 million euros).
According to the forecasts of the association, which unites most of the world’s airlines, total revenue in 2024 is expected to grow by 7.6% compared to the previous year to a record level of 964,000 million dollars (893,000 million euros). Expenditure growth will be 6.9% be slightly lower and amount to a total of 914,000 million dollars (846,000 million euros).
The number of passengers will reach 4.7 billion in 2024, also reaching an all-time high, surpassing the pre-pandemic figure of 4.5 billion in 2019. The number of flights will increase to 40.1 million (38.9 million in 2019). Due to the increase in costs and other structural factors, this peak in sales and travel will not translate into record results for companies due to falling margins (2.7% of sales). However, the profits reported this Wednesday are well above the forecasts that IATA itself made last summer, when it predicted a profit of $ 9.8 billion by 2023.
“Given the large losses of recent years, the expected net profit of $25.7 billion by 2024 is a tribute to the resilience of aviation,” emphasized IATA Director General Willie Walsh. Walsh said the speed of recovery has been exceptional, despite the pandemic costing aviation around four years of growth. “From 2024 onwards, the outlook suggests that we can expect more normal growth patterns in both passengers and cargo,” although the expected net profit margin of 2.7% is “well below our expectations.” Investors from almost any other sector would accept this. ” “Airlines will always compete fiercely for customers, but they remain too burdened by burdensome regulation, fragmentation, high infrastructure costs and a supply chain populated by oligopolies,” complained Walsh.
Passenger revenue is expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue growth measured in passenger kilometers (RPK) will be 9.8% next year compared to last year , more than double the pre-pandemic growth trend. High travel demand coupled with limited capacity due to ongoing equipment supply chain issues continue to create supply and demand conditions that support performance growth.
Optimistic outlook
Due to strict supply and demand conditions, efficiency levels are high and the load factor is expected to reach 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. A third of travelers surveyed say they are traveling more than before the pandemic. About 49% say 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 travel volumes in the next 12 months to remain similar to the previous 12 months.
In freight, revenue is expected to fall to $111 billion in 2024, well below the extraordinary peak of $210 billion in 2021 but above revenue of $101 billion in 2019. The Revenues continue to be negatively impacted by continued growth in cabin capacity (related to strong growth on the passenger side of the business) while international trade remains stagnant.
The fuel price forecast is $113.8 per barrel (jet) in 2024, representing a total fuel bill of $281 billion. It accounts for 31% of all operating costs. Industrial CO2 emissions will reach 939 million tons in 2024 due to the consumption of 99 billion gallons (374,755 million liters) of fuel.
The aviation industry will increase the use of sustainable aviation fuels (SAF) to reduce its carbon footprint. SAF production could rise to 0.53% of total airline fuel use in 2024, adding $2.4 billion to next year’s fuel bill. Additionally, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global, market-based carbon offset mechanism aimed at stabilizing emissions from international aviation. The costs associated with CORSIA are estimated to be $1 billion in 2024.
Risks
In its annual report, IATA believes that the profitability of the aviation industry is still fragile and could be influenced (positively or negatively) by many factors. Including global economic development. Falling inflation, low unemployment rates and strong travel demand are positive developments. However, there could be economic tensions. In China, for example, slow growth, high youth unemployment and turmoil in real estate markets, if not properly managed, could impact global economic cycles. If tolerance for high interest rates weakens and unemployment rises significantly, the strong consumer demand that has supported the recovery could also weaken.
The operational impact of the war in Ukraine and the war between Israel and Hamas was largely limited by diversions due to airspace closures. On the cost side, the conflicts have driven up oil prices, impacting airlines worldwide. An unexpected peace in one or both cases would bring benefits to the industry, but any escalation could lead to a completely different global economic scenario, from which aviation would not be immune, according to IATA.
The association is particularly concerned that supply chain issues could continue to impact global trade and the economy. Airlines were directly affected by unforeseen maintenance issues on some types of aircraft and engines, as well as delays in the delivery of spare parts and aircraft, which limited capacity expansion and fleet renewal. Both Airbus and Boeing, the world’s two largest manufacturers, have admitted they do not have the capacity to fulfill all orders.
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