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Airlines leave their black three-year period behind, although they are still far from pre-pandemic record profits

2023-12-06T12:58:35.431Z

Highlights: Airlines leave their black three-year period behind, although they are still far from pre-pandemic record profits. Total revenue in 2024 is expected to grow by 7.6% year-on-year to reach a record $964 billion (€000 billion) Passenger numbers will reach 4.700 billion in 2024, also marking an all-time high. The number of flights will rise to 40.1 million (38.9 million in 2019) The aviation industry will increase the use of sustainable aviation fuels to reduce its carbon footprint.


Airlines will earn nearly $24 billion, break passenger records in 000


The International Air Transport Association (IATA) expects the airline industry's net profits to reach $23.300 billion (€21.500 billion) in 2023 and rise to $25.700 billion (€23.800 billion) in 2024, leaving behind three years of losses due to the impact of the Covid-19 crisis. according to the annual report presented on Wednesday in Geneva. Airlines are thus emerging from three black years, with record losses in 2020 of 137,000 million dollars; 42,000 million in 2021 and 6,900 million in the red in 2022. But they are still far from pre-pandemic levels, when they reached a record profit of $29.300 billion (€27.160 billion) in 2019.

According to forecasts by the association, which groups most of the world's airlines, total revenue in 2024 is expected to grow by 7.6% year-on-year to reach a record $964 billion (€000 billion), while expense growth will be slightly lower at 893.000% for a total of $6 billion (€9 billion).

Passenger numbers will reach 4.700 billion in 2024, also marking an all-time high that exceeds the pre-pandemic level of 4.500 billion recorded in 2019. The number of flights will rise to 40.1 million (38.9 million in 2019) However, due to the increase in costs and other structural factors, this peak in revenues and passengers will not translate into record results for the companies due to the narrowing of margins (2.7% of revenues). However, the profits reported on Wednesday are well above the forecasts given by IATA itself last summer, when it forecast a profit of $9.800 billion for 2023.

"Given the heavy losses of recent years, the projected net profit of $25.700 billion in 2024 is a tribute to aviation's resilience," said IATA Director General Willie Walsh. According to Walsh, the speed of the recovery has been extraordinary, despite the fact that the pandemic has cost aviation about four years of growth. "From 2024 onwards, the outlook indicates that we can expect more normal growth patterns, for both passengers and cargo," although the projected net profit margin of 2.7% is "well below what investors in almost any other sector would accept". "Airlines will always compete fiercely for their customers, but they remain too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated by oligopolies," Walsh said.

Passenger revenue is expected to reach $717 billion in 000, up 2024% from $12 billion in 642. Revenue growth measured in passenger kilometers (RPKs) will be 000.2023% year-on-year next year, more than double the pre-pandemic growth trend. High demand for travel, coupled with limited capacity due to persistent aircraft supply chain issues, continues to create supply and demand conditions that support yield growth.

Optimistic outlook

Reflecting strict supply and demand conditions, efficiency levels are high and load factor is estimated to reach 82.6% in 2024, slightly better than in 2023 (82%) and the same as in 2019. IATA passenger survey data from November 2023 supports the optimistic outlook. One-third of travelers surveyed say they travel more than they did before the pandemic. Around 49% indicate that their travel habits are now similar to pre-pandemic levels. Only 18% said they traveled less. Looking ahead, 44% say they will travel more in the next 12 months than in the previous 12 months. Only 7% say they will travel less and 48% expect to maintain similar levels of travel in the next 12 months to the previous 12 months.

On the cargo front, revenue is expected to fall to $111 billion in 000, well below the extraordinary peak of $2024 billion in 210 but above 000's revenue of $2021 billion. Yields will continue to be negatively impacted by continued cabin capacity growth (related to strong growth on the passenger side of the business) as international trade stagnates.

The forecast for the fuel price is $113.8 per barrel (jet) in 2024, which will translate into a total fuel bill of $281 billion. It accounts for 000% of all operating costs. The industry's CO31 emissions in 2 will reach 2024 million tons due to the consumption of 939 billion gallons (99.000 million liters) of fuel.

The aviation industry will increase the use of sustainable aviation fuels (SAF) to reduce its carbon footprint. SAF production could rise to 0.53% of total airline fuel consumption by 2024, adding $2.400 billion to next year's fuel bill. In addition, the Carbon Offset and Reduction Scheme for International Aviation (CORSIA) is a global market-based carbon offset mechanism designed to stabilize emissions from international aviation. CORSIA-related costs are estimated at $1 billion by 000.

Risks

IATA considers in its annual report that the profitability of the airline industry is still fragile and could be affected (positively or negatively) by many factors. Among them, global economic developments. Declining inflation, low unemployment rates, and strong demand for travel are positive developments. However, economic tensions could arise. In China, for example, slow growth, high youth unemployment, and disorder in property markets, if not properly managed, could affect global business cycles. Similarly, if tolerance for high interest rates weakens and unemployment rises significantly, the strong consumer demand that has supported the recovery could weaken.

The operational impacts of the Ukraine war and the Israel-Hamas war have been largely limited thanks to diversions due to airspace closures. On the cost side, conflicts have pushed up oil prices, which is affecting airlines globally. An unexpected peace in one or both cases would bring benefits to the industry, but any escalation could produce a radically different global economic scenario to which aviation would not be immune, according to IATA.

The association is particularly concerned about the potential for supply chain issues to continue to impact global trade and business. Airlines have been hit directly by unforeseen maintenance problems on some types of aircraft and engines, as well as delays in the delivery of spare parts and aircraft, limiting capacity expansion and fleet renewal. Both Airbus and Boeing, the world's two largest manufacturers, have admitted that they do not have the capacity to fulfill all the orders.

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Source: elparis

All business articles on 2023-12-06

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