The return on invested capital is projected to be 5.7 per cent, about 3.4 percentage points below the average cost of capital. Operating profits are anticipated to reach $59.9 billion in 2024, up from an estimated $52.2 billion in 2023. Total revenues are expected to hit a record high of $996 billion, a 9.7 per cent increase from the previous year, while total expenses are projected to rise to $936 billion, a 9.4 per cent increase, also a record high. Total air cargo volumes are expected to reach 62 million tonnes in 2024.
Profitability is expected to strengthen in 2024 as revenues grow slightly faster than expenses, with operating profits expected to reach $59.9 billion, a 14.7 per cent increase from $52.2 billion estimated for 2023.
Cargo revenues are anticipated to fall to $120 billion in 2024 from $138 billion in 2023, both significantly down from the extraordinary peak of $210 billion in 2021, but still above the 2019 revenues of $101 billion and an improvement on the previous forecast of $111 billion announced in December 2023. Despite strong demand, cargo yields are expected to fall by 17.5 per cent in 2024 while remaining slightly above 2019 levels, as per IATA.
In 2024, all regions are expected to generate profits for the second consecutive year, with the most significant increase expected for Asia-Pacific carriers. North America continues to be the largest contributor to industry profits, supported by a high passenger load factor, robust yields, and strong consumer spending despite cost-of-living pressures. Passenger demand in North America is expected to grow by 7 per cent, with a strong load factor of 84 per cent anticipated to enhance revenue and operating profitability. In Canada, however, growth in traffic is slower, and wage pressure is greater than in the US market.
Europe's performance outlook remains positive, with demand expected to stay strong in 2024. However, supply chain issues, high interest rates, and potential labour disputes could limit further profitability increases in the near term. The Asia-Pacific region is expected to account for half of the world's revenue passenger kilometre (RPK) growth in 2024, driven largely by recovering domestic markets in China, Japan, and Australia. International travel in the region remains subdued, especially in China, where it is still below pre-COVID levels, indicating significant pent-up demand for cross-border travel that could boost future growth prospects.
Latin America has seen steady financial performance improvement since 2020, although performance across the region remains mixed. Where financial performance lags, it is largely due to economic and social turmoil in parts of the region. Countries in Central America, particularly Mexico, El Salvador, Guatemala, and Honduras, are key contributors to the region's profit growth. The improved outlook for 2024 is supported by strong sales growth and high profitability reported by airlines in the region in the first quarter of the year, with raised guidance for the full year.
The Middle East benefits from the strength of its regional economies and global hubs. The United Arab Emirates continues to attract both leisure and business travellers, while Saudi Arabia's significant investments in infrastructure and tourism drive robust growth in passenger and cargo volumes. Despite continued capacity additions, yields remain healthy, and travel demand is buoyant. However, geopolitical risks, particularly in the Levant, pose the main threat, although Gulf carriers are relatively less impacted unless tensions between Iran and Israel escalate.
Africa faces high operational costs and low propensity to spend on air travel, with connectivity challenges dampening industry expansion and performance. Despite these challenges, sustained demand for air travel is expected to deliver a second year of profitability for the region.
ALCHEMPro News Desk (DP)
Receive daily prices and market insights straight to your inbox. Subscribe to AlchemPro Weekly!
marketing@alchempro.com
