The International Air Transport Association released new profitability forecasts for global airlines, indicating that despite high interest rates slowing down developed and emerging market economies, carriers are projected to achieve record revenues this year and in 2024.
The net profits of the airline industry are forecasted to hit $25.7 billion in 2024, equating to a net profit margin of 2.7%. This marks an improvement from 2023, where a net profit of $23.3 billion is expected, representing a 2.6% net profit margin.
IATA said the revival of the airline industry from Covid lows is expected to moderate. Revenue is expected to rise 7.6% to $964 billion in 2024 from this year’s record $896 billion. The trade body noted elevated interest rates and inflation drive up capital costs, hurting profit margins.
Andrew Matters, IATA’s director of policy and economics, speaking at an event in Geneva, attributed the industry’s robust performance to the reopening of China.
“China was a big part of that,” Matters, who was quoted by Bloomberg, said.
He added, “Things came out better than we anticipated in terms of the strength of demand, and the downside risks we’d anticipated just didn’t materialize.”
“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,” Willie Walsh, IATA’s Director General, said in a statement.
In a BloombergTV interview, Walsh said IATA’s 2024 forecasts are “cautiously optimistic.”
“The recovery we’ve seen in 2023 has been very encouraging and should give the industry reason for optimism next year,” he continued.
A separate report from Visual Capitalists Pallavi Rao and Marcus Lu shows global tourism has rebounded to pre-pandemic levels.
Recent data from the Transportation Security Administration’s checkpoint records indicates that the Sunday after Thanksgiving was the busiest day for air travel at US airports ever.
Even with the bounce in US air travel demand, shares of carriers remain at Covid lows.
IATA predicts 4.7 billion people will travel in 2024, which is expected to exceed the 4.5 billion recorded in 2019.