The airline industry is expected to leave the COVID-19 shock behind and strengthen its profitability in 2024, according to the International Air Transport Association (IATA).
However, the group also stated in its outlook for 2024 that net profit margins will remain thin at 2.7% and will barely increase from the 2.6% expected in 2023.
This means airlines make $5.45 of profit on average for every passenger they fly, an amount that IATA’s Director General, Willie Walsh, likened to “just enough to get you a latte at Starbucks”.
The airline executive also highlighted that net profit margins are below the cost of capital.
Financial recovery in the industry is driven mostly by revenues rising faster than expenses (+7.6% vs +6.9%). The airline industry is expected to register its highest ever combined revenue, reaching $964 billion, $717 billion of which will come from passenger revenue.
Airlines are also expected to carry a record 4.7 billion passengers in 2024, up from the 4.5 billion registered in 2019 pre-pandemic.
Operational profits are expected to rise by a solid 21.1%, but the bottom-line results will be weighed down by increased financial costs due to hiking interest rates, bringing the overall net profit increase down to 10%.
During his address at IATA’s Global Media Day, which took place in Geneva on December 6, 2023, Walsh commented on other current matters affecting the airline industry.
He lashed out at service providers such as air traffic control organizations and airports, singling out the United Kingdom’s NATS in particular, and complained that airlines were often made to pay for the mismanagement of others. He said better regulatory mechanisms were needed to prevent costs arising from these mistakes being passed onto airlines and passengers.
Walsh also expressed satisfaction that Dutch authorities have backtracked on previous plans to limit and reduce flights at Amsterdam Airport Schiphol (AMS). He highlighted that that proposed plan would have been damaging to the Dutch economy, stating that there are many other ways to limit the effects of noise before taking such drastic measures.