African airlines to suffer losses over economic challenges
The International Air Transport Association (IATA) has predicted that the global airline industry’s net profit will reach $25.7 billion in 2024, representing a 2.7 per cent net profit margin. This would be an improvement over 2023, which is expected to see a net profit of $23.3 billion (2.6 per cent net profit margin).
IATA stated that the projected profit will come despite a slowing global economy, high fuel prices, and geopolitical tensions.
Meanwhile,the trade association of the world’s airlines predicted that African airlines would incur losses in both 2023 and 2024. IATA noted that the African market is a challenging one for airlines, with economic, infrastructure, and connectivity challenges impacting the industry’s performance.
According to IATA, airline industry operating profits are expected to reach $49.4 billion in 2024, up from $40.7 billion in 2023. This growth is largely driven by strong demand for air travel, with total revenues expected to grow 7.6 per cent year-over-year to a record $964 billion.
However, operating expenses are also expected to increase, albeit at a slightly lower rate of 6.9 per cent, reaching $914 billion. Despite the challenges facing the industry, IATA forecasts that 4.7 billion people will travel by air in 2024, a record high that exceeds pre-pandemic era.
IATA emphasised that the predicted increase in airline operating profits is due to the industry’s resilience in the face of ongoing challenges. In terms of revenue, passenger revenues are expected to reach $717 billion in 2024, up 12 per cent from $642 billion in 2023. This is driven by an increase in the number of people traveling by air, as well as the increasing cost of air travel. However, cargo revenues are expected to decline to $111 billion in 2024, down from the $210 billion peak reached in 2021.
Willie Walsh, director general of IATA, noted that despite the challenges facing the airline industry, there is still strong demand for air travel. However, he also noted that the return on invested capital is lagging behind the cost of capital, due in part to rising interest rates around the world. This, he explained, means that airlines will need to carefully manage their costs in order to remain profitable.
According to Walsh, the airline industry has been resilient in the face of the pandemic. This is as people are eager to travel and have helped the industry to recover to pre-pandemic levels of connectivity.
Walsh noted that the recovery has been swift, but it seems that the pandemic has caused the airline industry to lose four years of growth. Going forward,he said the outlook is for more normal patterns of growth in both passenger and cargo numbers, starting in 2024.