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Global Airlines To Clock Revenue of $1 Trillion An aggregate return above the cost of capital, however, continues to elude the global airlines as the industry is expected to earn a 5.7 per cent return on invested capital, which is 3.4 per cent below the average cost

By Shrabona Ghosh

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Global airlines continue to shore-up their profitability amid macroeconomics headwinds. The industry is expected to generate a combined revenue of almost $1 trillion in 2024, up by 9.7 per cent year-on-year (YoY); however, expenses will also be at a record high of $936 billion, according to International Association of Air Transport Association (IATA). "The expected aggregate net profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses. With a record five billion air travelers expected in 2024, the human need to fly has never been stronger. Moreover, the global economy counts on air cargo to deliver the $8.3 trillion of trade that gets to customers by air," said Willie Walsh, IATA's Director General.

The sector will be clocking a net profit of $30.5 billion, a net margin of just over 3 per cent, the director general mentioned, adding that airlines only retain $6.14 of profit per passenger. Operating profits for airlines globally are expected to reach $59.9 billion in 2024, up nearly $7 billion compared to 2023. IATA strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts. An aggregate return above the cost of capital, however, continues to elude the global airlines as the industry is expected to earn a 5.7 per cent return on invested capital, which is 3.4 per cent below the average cost.

"Earning just $6.14 per passenger is an indication of just how thin our profits are—barely enough for a coffee in many parts of the world. To improve profitability, resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand. Relief from the parade of onerous regulation and ever-increasing tax proposals would also help. An emphasis on public policy measures that drive business competitiveness would be a win for the economy, for jobs, and for connectivity. It would also place us in a strong position to accelerate investments in sustainability," added Walsh.

Passenger revenues are expected to reach $744 billion in 2024, up 15.2 per cent from $646 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 11.6 per cent year on year. The long-term 20-year growth trend is expected to see passenger demand grow 3.8 per cent annually for the 2023-2043 period.

Cargo revenues are expected to fall to $120 billion in 2024 from $138 billion in 2023. Both are down sharply from the peak of $210 billion in 2021, but it is above 2019 revenues, which were $101 billion and an improvement on the previous forecast of $111 billion announced in December 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 normalization 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," he said.

Industry expenses are expected to grow to $936 billion in 2024, up by 9.4 per cent in 2023. Fuel is expected to average $113.8/barrel (jet) in 2024 translating into a total fuel bill of $291 billion, accounting for 31 per cent of all operating costs. "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. SAF production could rise to satisfy 0.53 per cent of global demand for fuel in 2024, the cost of which will be $3.75 billion. That is $2.4 billion additional to what it would cost to purchase the same quantity of jet fuel," he explained.

Ensuring profitability will enable investments in products to meet the need for sustainability solutions as the industry aims to achieve net zero carbon emissions by 2050.

An inventory of 38.7 million flights is expected to be available in 2024. This is 1.4 million flights below previous estimates (December 2023) largely attributable to the slowing pace of deliveries in the face of persistent supply chain issues in the aerospace sector: The number of aircraft deliveries scheduled for 2024 is expected to be 1,583, which is 11 per cent less than the expectations published just months ago that anticipated 1,777 aircraft would join the global fleet in 2024.

Shrabona Ghosh

Correspondent

A journalist with a cosmopolitan mindset. I lead a project called 'Corporate Innovations' wherein I cover corporates across verticals and try to tell stories on innovations. Apart from this, I write industry pieces on FMCGs, auto, aviation, 5G and defense. 
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