Global airline revenue seen nearing $1 trillion this year

Annual global airline revenue this year is likely to surge to about $1 trillion, according to the International Air Transport Association’s (Iata) outlook.

The global airlines grouping said profitability in the sector will improve this year as the increase in revenues overtakes that of expenses, with operating profits set to reach $59.9 billion, about 15% up from the previous year.

Net profits, however, are expected to grow slightly slower at about 11.3%, from $27.4 billion estimated for the previous year to $30.5 billion this year.

Operating profit measures earnings from core business activities such as passenger and cargo services, while net profit accounts for all earnings after deductions such as interest and taxes.

The slower growth in net profit when compared with operating profit suggests there might be higher non-operating costs, such as increased interest payments or taxes, impacting overall earnings.

Of Iata’s overall revenue forecast of $996 billion for the year, passenger revenues are expected at $744 billion, up 15.2% from $646 billion in 2023.

Revenue passenger kilometers (RPK) growth, or the forecasted increase in the total number of kilometers traveled by paying passengers, is expected to be 11.6% year on year.

Asia-Pacific will be responsible for half of the world’s RPK growth, driven largely by recovering domestic markets in China, Japan, and Australia, Iata said. International travel in the region remains subdued, especially in China, where it is still below pre-covid levels. This indicates that there is still a lot of pent-up demand for cross-border travel in the region.

“In a world of many and growing uncertainties, airlines continue to shore-up their profitability. The expected aggregate net profit of $30.5 billion in 2024 is a great achievement considering the recent deep pandemic losses. With a record five billion air travelers expected in 2024, the human need to fly has never been stronger,” Iata director general Willie Walsh said.

Cargo revenues, on the other hand, may fall to $120 billion this year from $138 billion last year. Incomes from this segment had climbed to an “extraordinary peak” of $210 billion in 2021.

Despite the strength of demand, cargo yields are expected to fall 17.5% in 2024, Iata said, adding that air cargo in general is in a period of correction following an exceptional year in 2021.

“The global economy counts on air cargo to deliver the $8.3 trillion of trade that gets to customers by air. Without a doubt, aviation is vital to the ambitions and prosperity of individuals and economies,” Walsh said.

Industry expenses, meanwhile, are expected to grow to $936 billion in 2024, up 9.4% from the previous year, with fuel expected to average $113.8/barrel (jet) in 2024 translating into a total fuel bill of $291 billion, or 31% of all operating costs.

An inventory of 38.7 million flights is expected to be available this year. which is 1.4 million flights below earlier estimates (December 2023) largely attributable to the slowing pace of deliveries in the face of persistent supply chain issues, Iata said.

“The airline industry is on the path to sustainable profits, but there is a big gap still to cover. A 5.7% return on invested capital is well below the cost of capital, which is over 9%. And earning just $6.14 per passenger is an indication of just how thin our profits are—barely enough for a coffee in many parts of the world. To improve profitability, resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand,” Walsh said.

Relief from the parade of onerous regulation and ever-increasing tax proposals would also help. An emphasis on public policy measures that drive business competitiveness would be a win for the economy, for jobs, and for connectivity,” he added.

India to host next Iata AGM

Meanwhile, India will host the annual general meeting (AGM) of Iata next year after a gap of 42 years. The last such event was held in the country in 1983

IndiGo will be the host airline of the AGM, which will take place between 8-10 June next year, Iata announced this week.

About 330 airlines, comprising about 80% of global air traffic, are members of Iata.