American Airlines aircraft are seen at the gates of LaGuardia Airport ahead of the Thanksgiving holiday in New York City, United States, November 21, 2023.
Shannon Stapleton | Reuters
Airlines expect record numbers of travelers and revenue in 2024 but will continue to be constrained by high capital costs and limited capacity, the International Air Transport Association (IATA) said on Wednesday.
The industry group expects the sector’s net profit to reach $25.7 billion in 2024 with a net profit margin of 2.7%, a slight improvement from this year’s upwardly revised forecast of $23.3 billion. Dollar net profit and 2.6% margin.
Total revenue in 2024 is expected to rise 7.6% year-on-year to a record $964 billion, with around 4.7 billion people expected to travel in 2024, a figure exceeding the pre-pandemic figure of 4, 5 billion in 2019.
As post-pandemic travel demand booms in North America, the Middle East and Europe, the aviation sector has largely recovered from the unprecedented impact of the Covid-19 pandemic, when most countries grounded planes and banned travel for extended periods became the world.
IATA Director General Willie Walsh said in a statement that the expected stabilization of profits in 2024 was a “tribute to the resilience of aviation” given the large losses of recent years.
“The speed of recovery has been exceptional; but it also appears that the pandemic has cost aviation around four years of growth. From 2024 onwards, the outlook suggests that we can expect more normal growth patterns for both passenger and freight traffic,” Walsh said in a statement.
The recovery in consumer demand following the pandemic was reflected on Wednesday in the full-year results of Anglo-German travel group Tui, which reported a 139% rise in adjusted earnings before interest and tax (EBIT). The group also forecast a 25% year-on-year increase in EBIT (earnings before interest and taxes) in 2024, which would lead to an increase in the share price.
Reacting to Tui’s results, analysts at Jefferies said in a research note on Wednesday that the market focus would be on the 2024 forecast, “which implies a positive outlook for international travel from Europe.”
According to IATA, the airline industry’s operating profit is expected to reach $49.3 billion in 2024, up from $40.7 billion in 2023.
However, the panel estimated that the return on invested capital will lag the cost of capital by 4 percentage points in both years due to a huge rise in interest rates as central banks have tightened monetary policy to combat inflation over the past two years.
Walsh said the industry’s profit outlook needed to be put “in perspective” and that despite the impressive recovery, a net profit margin of 2.7% remained “well below what investors would accept in almost any other industry”.
“Of course, many airlines are doing better than average, and many are struggling. But there is something to be learned from the fact that airlines on average only withhold $5.45 for each passenger carried,” he said.
“That’s about enough to buy a basic ‘grande latte’ at a London Starbucks. But it is far too little to build a shock-resilient future for an important global industry on which 3.5% of GDP depends and on which 3.05 million people earn their livelihoods directly.”
Walsh added that while airlines will always compete “fiercely” for customers, they remain “far too burdened by strict regulation, fragmentation, high infrastructure costs and a supply chain populated by oligopolies.”
Source : www.cnbc.com