Signs point to a bumper travel year in 2024

  • The industry group expects the sector’s net profits 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.
  • IATA Director General Willie Walsh said in a statement that following the significant losses incurred in recent years, the expected stability of profits in 2024 is “a tribute to aviation’s resilience.”

American Airlines planes appear at the gates of LaGuardia Airport before the Thanksgiving holiday, in New York City, US, November 21, 2023.

Shannon Stapleton | Reuters

Airlines expect record passenger numbers and revenues in 2024 but will remain constrained by high costs of capital and limited capacity, the International Air Transport Association (IATA) said on Wednesday.

The industrial group expects the sector’s net profits 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 net profit and a 2.6% margin.

Total revenues in 2024 are expected to grow by 7.6% year-on-year to reach a record level of $964 billion, and about 4.7 billion people are expected to travel in 2024, a number that exceeds the pre-pandemic level of 4.5 billion people in 2019. .

With post-pandemic travel demand booming in North America, the Middle East and Europe, the aviation sector has mostly recovered from the unprecedented hit it suffered during the Covid-19 pandemic, when planes were grounded and travel was banned for long periods in most countries around the world. the world.

IATA Director General Willie Walsh said in a statement that following the significant losses incurred in recent years, the expected stability of profits in 2024 is “a tribute to aviation’s resilience.”

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“The speed of recovery has been exceptional, but the pandemic also appears to have cost aviation about four years of growth. From 2024, projections suggest we can expect more normal growth patterns for both passengers and cargo,” Walsh said in a report. statement.

The post-pandemic recovery in consumer demand was evident in full-year results released on Wednesday from Anglo-German travel group Tui, which posted a 139% rise in underlying earnings before interest and tax (EBIT). The group also expects a 25% year-on-year increase in EBIT (earnings before interest and tax) in 2024, pushing its share price higher.

In response to Tui’s findings, analysts at Jefferies said in a research note on Wednesday that the market’s focus will be on 2024 guidance, “implying a positive outlook for international travel from Europe.”

The airline industry’s operating profits are expected to reach $49.3 billion in 2024, up from $40.7 billion in 2023, according to the International Air Transport Association (IATA).

However, the authority estimated that over the two years, the return on invested capital would lag behind the cost of capital by 4 percentage points as a result of the significant rise in interest rates, as central banks have tightened monetary policy over the past two years to combat inflation.

Walsh said the industry’s profit outlook needed to be put in “proper perspective,” and that despite the impressive recovery, the 2.7% net profit margin was still “far lower than what investors in almost any other industry would accept.”

He added: “Of course, many airlines are doing better than this average, and many are struggling. But there is something to be learned from the fact that airlines will keep on average only $5.45 for each passenger they carry.”

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“This is enough to buy a basic Grand Latte at a Starbucks in London. But it is far short of building a shock-resilient future for a critical global industry on which 3.5% of GDP depends and 3.05 million people live.” Earn their livelihood directly.”

Walsh added that while airlines will always compete “fiercely” for customers, they remain “very burdened by burdensome regulation, fragmentation, high infrastructure costs and a supply chain riddled with oligopolies.”

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