Airlines' Profits on the Rise but High Interest Rates Playing Spoilsport: IATA

IANS 07 December 2023

Economy & Nation

The International Air Transport Association (IATA) on Wednesday announced strengthened profitability projections for airlines in 2023 which will then largely stabilise in 2024.

However, net profitability at the global level is expected to be well below the cost of capital in both years due to rising interest rates, the report states.

Outlook highlights include that airline industry net profits are expected to reach US$25.7bn (billion) in 2024 (2.7% net profit margin). That will be a slight improvement over 2023 which is expected to show a US$23.3 billion net profit (2.6% net profit margin).

In both 2023 and 2024, the return on invested capital will lag the cost of capital as interest rates around the world have risen in response to the sharp inflationary impulse.

Airline industry operating profits are expected to reach US$49.3 billion in 2024 from US$40.7 billion in 2023, while total revenues in 2024 are expected to grow 7.6% year over year to a record US$964 billion.

Expense growth is expected to be slightly lower at 6.9% for a total of US$914 billion.

Some 4.7bn people are expected to travel in 2024, an historic high that exceeds the pre-pandemic level of 4.5bn recorded in 2019.

Cargo volumes are expected to be 58MT (million tonnes) and 61MT in 2023 and 2024, respectively.

"Considering the major losses of recent years, the US$25.7 billion net profit expected in 2024 is a tribute to aviation's resilience. People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity. 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," IATA’s Director General Willie Walsh said.

"Industry profits must be put into proper perspective. While the recovery is impressive, a net profit margin of 2.7% is far below what investors in almost any other industry would accept," he added.

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