Global passenger airlines are poised to rake in record profits in 2024 due to an anticipated surge in travelers, but overall growth may be limited as high capital costs and limited capacity impact the bottom line, according to data projections released Wednesday by the International Air Transport Association. Photo by Debbie Hill/UPI | License Photo
Dec. 6 (UPI) -- Global passenger airlines are poised to rake in record profits in 2024 due to an anticipated surge in travelers, but overall growth may be limited as high capital costs and limited capacity impact the bottom line, according to data projections released Wednesday by the International Air Transport Association.
The airline industry expects to see about $25.7 billion in profits in 2024, representing a small improvement from the estimated $23.3 billion that carriers will make this year, amounting to a profit margin of 2.7%, said the report from the trade association.
At the same time, airliners anticipate record-breaking revenue of $964 billion in 2024, marking a 7.6% increase from this year. The projections also suggest that approximately 4.7 billion people will travel throughout 2024, surpassing 4.5 billion Americans who traveled in 2019, before the COVID-19 pandemic.
The projections report comes as the airline industry was experiencing a strong economic recovery in North America, the Middle East and Europe, driven by a resurgence in travel demand following the end of the COVID-19 global health emergency in May.
At the same time, major airlines were facing increased pressure from the Biden administration to eliminate hidden fees in the price of tickets, including family seating surcharges, and improve service and transit times, especially during the holidays.
Airline operating profits were forecast to increase from $40.7 billion in 2023 to $49.3 billion in 2024, according to IATA.
Cargo volume is also expected to reach 61 million tons in 2024, up from 58 million tons in 2023.
IATA Director General Willie Walsh issued a statement saying the airline industry's financial rebound was a "tribute to aviation's resilience."
"The speed of the recovery has been extraordinary, yet it also appears that the pandemic has cost aviation about four years of growth," he said. "From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo."
Despite the positive outlook, the report pointed to some challenges, including a projection that return on invested capital for airlines is likely to fall short of the cost of capital by 4 percentage points over the next two years due to higher interest rates.
Walsh also emphasized the need to put the rosy profit outlook for airlines into "proper perspective," highlighting that despite the recovery, the net profit margin of 2.7% still falls "far below what investors in almost any other industry would accept."
"Of course, many airlines are doing better than that average, and many are struggling. But there is something to be learned from the fact that, on average airlines will retain just $5.45 for every passenger carried," he said, adding, "That's about enough to buy a basic 'grande latte' at a London Starbucks."