Arab News, Tue, Jun 04, 2024 | Dhu al-Qadah 27, 1445
Middle Eastern airlines set for $3.8bn profit surge in 2024: IATA
Saudi Arabia:
Middle Eastern airlines are set to see profits in 2024 surge 22.5 percent from
previous estimates to reach $3.8 billion, according to the latest forecast by
the International Air Transport Association.
The new figure comes after the IATA projected in
December 2023 there would be net profits of $3.1 billion for air carriers in the
region in the following 12 months.
Airlines in the area are maintaining their upward
trajectory in passenger and cargo volumes thanks to strong regional economies,
IATA said ahead of its General Assembly in Dubai.
The association highlighted that Saudi Arabia’s
substantial investments in infrastructure and tourism have contributed to robust
growth, while the UAE remains a key destination for both leisure and business
travelers.
On a global scale, the airline industry is set to
achieve record revenues of $1 trillion in 2024. All regions worldwide are
expected to generate profits for a second year in a row, with the most
significant increase being for Asia-Pacific carriers.
In a press release issued to coincide with the
gathering in the UAE, the IATA struck an upbeat note, and said: “Although
airlines continue to add capacity, yields remain healthy and the demand for
travel remains buoyant and looks set to continue apace. Geopolitical risks are
the main threat, especially to the Levant carriers.”
“The Gulf carriers are relatively less impacted
unless tensions between Iran and Israel escalate.”
Addressing the General Assembly, IATA’s Director
General Willie Walsh noted that the sector’s projected net profit in 2024 is a
significant achievement, especially considering the severe losses experienced
during the pandemic.
“With a record 5 billion air travelers expected in
2024, the human need to fly has never been stronger,” Walsh stated.
The association revealed a revised, upbeat
profitability forecast for the global airline industry in 2024, signaling an
improvement over previous projections made in June and December 2023.
Net profits for airlines are expected to reach
$30.5 billion in 2024, reflecting a net profit margin of 3.1 percent. This is a
notable increase from the estimated $27.4 billion in net profits for 2023, which
had a margin of 3 percent. It also surpassed the December 2023 forecast, which
anticipated $25.7 billion in profits with a 2.7 percent margin.
However, the return on invested capital for 2024
is projected to be 5.7 percent, which remains approximately 3.4 percentage
points below the average cost of capital.
Operating profits are expected to climb to $59.9
billion in 2024, up from an estimated $52.2 billion in 2023. The total revenues
for the industry are projected to hit a record high of $996 billion in 2024,
representing a 9.7 percent increase.
The number of air travelers is anticipated to set
a new record at 4.96 billion, while total air cargo volumes are expected to
reach 62 million tonnes.
Walsh highlighted that airlines are projected to
connect nearly 5 billion people on 22,000 routes through 39 million flights this
year, facilitating $8.3 trillion in trade.
He stressed that strengthening airline
profitability and financial resilience is crucial for continued investment in
customer needs and sustainability initiatives, especially the goal of achieving
net-zero carbon emissions by 2050.
Despite the positive outlook, the top official
pointed out that the airline industry still has significant ground to cover.
He noted that the modest profit of $6.14 per
passenger barely covers the cost of a cup of coffee in many parts of the
world.
Improving profitability will require addressing
supply chain issues to deploy fleets more efficiently and reducing the burden of
onerous regulations and rising taxes.
Walsh called for public policy measures that
enhance business competitiveness. These measures would benefit the economy,
jobs, and connectivity and support accelerated investments in sustainability.
In 2024, passenger revenues are projected at $744
billion, which is up 15.2 percent from 2023. Passenger demand is expected to
grow annually at 3.8 percent from 2023 to 2043.
Passenger yields are forecasted to strengthen by
3.2 percent, with an average return airfare of $252 in 2024. The average
passenger load factor is expected to reach 82.5 percent, close to pre-pandemic
levels.
Polling data from April 2024 shows strong
performance expectations for passenger markets, with 39 percent of respondents
planning to travel more in the next 12 months.
Cargo revenues are expected to decline to $120
billion in 2024 but still above 2019 levels, with yields in this area decreasing
by 17.5 percent.
For 2024, the IATA expected $1 trillion in
revenues. However, total industry expenses are forecasted to grow to $936
billion, with fuel costs accounting for 31 percent of operating costs. Non-fuel
expenses, including labor costs, are well-controlled.
The total number of flights is expected to be 38.7
million in 2024, with 1,583 aircraft deliveries, mitigating supply chain
issues.
Industry profitability remains fragile and could
be influenced by various factors, including global economic developments,
geopolitical tensions, supply chain disruptions, regulatory risks, and public
policy changes.
Economic developments in China, particularly
slowing growth and high youth unemployment, could have significant impacts,
according to the IATA press release, which added that the operational impact of
the Russia-Ukraine war and the Israel-Hamas conflict has been limited, but any
escalation could negatively affect the economic outlook.
Supply chain issues continue to affect airlines,
causing unforeseen maintenance problems and delivery delays for aircraft and
parts, the release continued.
Walsh emphasized that addressing supply chain
issues and reducing regulatory burdens are critical to enhancing profitability.