Airline association Iata has raised its profit forecast for this year, estimating carriers will earn a collective $23 billion in profits and predicting an increase to almost $26 billion in 2024 on the back of record revenues.
However, Iata calculates this will equate to a net margin globally of just 2.7%, pointing out it remains “well below the cost of capital”.
The association welcomed the sector’s strengthened profitability, with industry net profits of $23.3 billion expected this year and $25.7 billion forecast in 2024 from an operating profit of $49.3 billion next year.
But it noted the return on invested capital would lag the cost of capital by four percentage points in both years, in part due to rising interest rates.
Iata also highlighted “significant regional variations in financial performance”.
It forecasts global passenger numbers will reach 4.7 billion in 2024, exceeding the pre-pandemic high of 4.5 billion recorded in 2019.
Iata director general Willie Walsh hailed the forecast profit as “a tribute to aviation’s resilience”, saying: “The speed of the recovery has been extraordinary, yet it also appears the pandemic has cost aviation about four years of growth.
“The outlook indicates we can expect more normal growth patterns from 2024.”
But he argued: “Industry profits must be put into proper perspective. A net profit margin of 2.7% is far below what investors in almost any other industry would accept.
“Of course, many airlines are doing better than that, and many are struggling. But on average airlines will retain just $5.45 for every passenger carried.
“That is far too little to build a future resilient to shocks.”
Walsh suggested: “Airlines remain far too burdened by regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies.”
Iata expects airline revenues to rise by 7.6% next year ahead of an increase in costs of 6.9%
The association forecasts industry revenues should reach a record high of $964 billion in 2024 and the number of flights exceed 40 million, up from 36.8 million this year and exceeding the 38.9 million in 2019.