KUALA LUMPUR, June 3 — The International Air Transport Association (IATA) has upgraded its 2024 profitability projections for airlines to US$30.5 billion in net profit compared to the US$25.7 billion forecast made in December 2023. (US$1 = RM4.71)
It said the improved profitability is also estimated to be higher than 2023’s U$27.4 billion.
IATA said North America continues to be the most significant contributor to industry profits, supported by a high passenger load factor, robust yields, and strong consumer spending despite cost-of-living pressure.
Meanwhile, Asia Pacific is expected to be responsible for half of the world’s revenue passenger kilometres (RPK) growth in 2024, driven largely by recovering domestic markets in China, Japan, and Australia.
“International travel in the region remains subdued, especially in China, where it is still below the pre-COVID levels.
“This indicates that there is still a lot of pent-up demand for cross-border travel in the region, which will likely boost future growth prospects,” it said in a statement.
As for revenue, IATA forecasts revenue in 2024 to hit a new high of US$996 billion.
“Passenger revenues are expected to reach US$744 billion in 2024, up 15.2 per cent from US$646 billion in 2023, with RPKs growth expected to be 11.6 per cent year on year,” it said.
In contrast, cargo revenues are expected to fall to US$120 billion in 2024 from US$138 billion in 2023.
“Despite the strength of demand, cargo yields are expected to fall 17.5 per cent in 2024 while remaining slightly above 2019 levels.
“This is a normalisation after extraordinary pandemic highs. A key factor in this is the significant belly capacity that entered the market in 2023 in tandem with the recovery of passenger travel,” it said.
Overall, IATA projected total travellers to reach a new record of 4.96 billion this year, while total air cargo volumes are expected to reach 62 million tonnes in 2024.
Meanwhile, the operating profits of airlines are expected to reach US$59.9 billion in 2024, up from an estimated US$52.2 billion in 2023.
IATA said an aggregate return above the cost of capital, however, continues to elude the global airline industry.
It said the return on invested capital in 2024 is expected to be 5.7 per cent, which is about 3.4 percentage points below the average cost of capital.
“The airline industry is on the path to sustainable profits, but there is a big gap still to cover. A 5.7 per cent return on invested capital is well below the cost of capital, which is over 9.0 per cent.
“And earning just US$6.14 per passenger is an indication of just how thin our profits are. It is barely enough for a coffee in many parts of the world,” said IATA director general Willie Walsh.
On top of that, jet fuel is expected to average US$113.8 per barrel in 2024, translating into a total fuel bill of US$291 billion, accounting for 31 per cent of all operating costs.
IATA added that 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 per cent in 2024.
— Bernama
