Global airlines raise 2024 profit forecast to $30.5bn amid strong passenger demand

Geopolitical risk from Israel-Gaza war is the main threat for Middle East airlines, Iata says

Willie Walsh, head of International Air Transport Association, said supply chain delays and shortages continue to plague the industry. Photo: Iata

Global airlines have raised their profit forecast to $30.5 billion in 2024 as they prepare to carry a record five billion passengers this year, the International Air Transport Association (Iata) said.

The projection is 11.3 per cent higher than the $27.4 billion net profit in 2023 and an improvement on Iata's December forecast of $25.7 billion for this year, the airline group said at its 80th annual meeting in Dubai on Monday.

Meanwhile, carriers in the Middle East will earn a net profit of $3.8 billion this year, up from $3.1 billion last year, according to Iata's forecast.

Their profit per passenger is $15.20, compared to the global average of about $6.

“To make more profit, you need efficient operations, high load factors and a population keen to travel and that's not too price sensitive, if all those conditions are fulfilled than those airlines will make more money,” Iata chief economist Marie Owens Thomsen told a media briefing.

The UAE continues to benefit from its appeal to both leisure and business travellers, while Saudi Arabia’s heavy investments in infrastructure and tourism are delivering robust growth in passenger and cargo volumes, Iata said.

Although airlines continue to add capacity, yields remain healthy and the demand for travel “remains buoyant” and looks set to continue, it said.

However, geopolitical risks are the main threat, especially to the Levant carriers, Iata said.

“The Gulf carriers are relatively less impacted unless tensions between Iran and Israel escalate”, it added.

'Wafer-thin' profit

Globally, total revenue are expected to reach $996 billion in 2024, a 9.7 per cent increase from a year ago, Iata said in its annual report.

However, airlines' expenses will also be at a record high of $936 billion this year, up 9.4 per cent from 2023, eating into their profit per passenger.

Fuel is expected to average $113.8 a barrel in 2024, translating into a total fuel bill of $291 billion, accounting for 31 per cent of all operating costs, Iata said.

“For all the value airlines create, how much profit do we retain per passenger? It's just $6.14 … that buys you a single espresso in this hotel’s coffee shop,” Willie Walsh, Iata's director general, said.

“Governments who love to look to our industry for new tax revenue need to understand that our margins are wafer thin and we rarely earn our cost of capital.”

The global aviation industry has recovered from the coronavirus pandemic that plunged airlines into financial losses and heavy debt as they were forced to ground aircraft.

But while travel demand has bounced back strongly, airlines around the world are facing another spate of problems including supply delays and shortages, geopolitical risks from wars in Ukraine and Gaza, expensive sustainable aviation fuel (SAF), tough regulatory environment and increasing tax proposals.

“We deserve to celebrate the hard work that has brought our industry back from the brink, while acknowledging that we remain squeezed between a fiercely competitive environment downstream and the oligopolistic upstream supply chain’s lack of competition,” Mr Walsh said.

“Moreover, the best thing that I can say about the supply chain exasperations of the last years is that they appear to have not got worse.”

To improve profitability, Mr Walsh said that resolving supply issues is of “critical importance” so airlines can deploy fleets efficiently to meet demand, while “relief from the parade of onerous regulation” and “ever-increasing” tax proposals would also help.

The average passenger load factor is expected to be 82.5 per cent in 2024.

This is largely in line with pre-pandemic levels (82.6 per cent in 2019) and reflects tight supply and demand conditions from continuing supply issues for aircraft and engines.

Passenger revenue are expected to reach $744 billion in 2024, up about 15 per cent from $646 billion in 2023, according to Iata.

Average passenger load factor is expected to be 82.5 per cent in 2024, reflecting airlines' constrained capacity growth.

By contrast, cargo revenue are expected to fall to $120 billion in 2024, from $138 billion in 2023 and the pandemic peak of $210 billion in 2021.

Cargo yields are expected to fall by 17.5 per cent in 2024, remaining slightly above 2019 levels.

“This is a normalisation after extraordinary pandemic highs,” Iata said, citing the significant belly capacity that entered the market in 2023 as passenger travel recovered.