Passengers walk through the terminal at Baltimore/Washington International Thurgood Marshall Airport, in Linthicum, Md., on Nov. 21.JIM WATSON/Getty Images
Airline profits are set to stabilize in 2024 as continued growth in travel after the pandemic is offset by the high cost of capital and capacity constraints, industry group IATA said on Wednesday.
The global airline sector has largely recovered from the COVID-19 pandemic, which saw planes grounded and travellers reluctant to fly, as demand has boomed across North America, the Middle East and Europe.
The airline sector returned to profitability in 2023, with net profit expected at US$23.3-billion on a 2.6-per-cent margin, and is set to reach US$25.7-billion and a margin of 2.7 per cent next year, the International Air Transport Association said.
But while revenues are tipped to reach a record US$964-billion, the high cost of capital driven by rising interest rates is troubling, the global body said.
“Industry profits must be put into proper perspective,” IATA’s head Willie Walsh said.
“On average airlines will retain just [US]$5.45 for every passenger carried. That’s about enough to buy a basic grande latte at a London Starbucks.”
Still, the number of travellers globally is set to climb to historic levels, with 4.7 billion people expected to travel in 2024 compared with 4.5 billion in 2019.
And many countries that lagged in the travel recovery, such as China where international travel is still 40 per cent below levels before the pandemic, are set to turn a profit again in 2024.
Global instability, including the Israel-Hamas war and Ukraine war, could negatively impact the sector, the industry body warned, especially as they continue to drive up oil prices.
Jet fuel prices are expected to account for 31 per cent of all airline operating costs.