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According to the International Air Transport Association (IATA), the airline sector will recover from the COVID-19 shock and improve its profitability by 2024.
However, the group also indicated in its 2024 estimate that nett profit margins will remain low at 2.7%, scarcely increasing from 2.6% in 2023.
This equates to an average profit of $5.45 per passenger flown by airlines, compared to “just enough to get you a latte at Starbucks”, said IATA’s Director General, Willie Walsh.
The airline CEO also pointed out that nett profit margins are lower than the cost of capital.
The industry’s financial recovery is mainly driven by sales growing faster than costs (+7.6% versus +6.9%). The airline sector is forecast to record its highest-ever combined revenue of $964 billion, with passenger revenue accounting for $717 billion of that total.
Airlines are also predicted to handle 4.7 billion passengers in 2024, up from 4.5 billion in pre-pandemic 2019.
Although operational earnings are forecast to climb by a healthy 21.1%, the bottom line will be weighted down by rising finance costs as interest rates rise, bringing the entire nett profit gain down to 10%.
Walsh addressed various issues impacting the airline sector during his speech at IATA’s Global Media Day, which took place in Geneva on 6 December, 2023.
He criticised service providers such as air traffic control organisations and airports, particularly the United Kingdom’s NATS. He said that airlines were frequently made to pay for the mistakes of others. He stated that improved regulatory procedures were required to prevent these errors’ costs from being passed on to airlines and customers.
Walsh was also pleased that Dutch officials reversed prior proposals to limit and cut flights at Amsterdam Airport Schiphol (AMS). He emphasised that the planned proposal would have been detrimental to the Dutch economy, adding that there are several alternative methods to mitigate the consequences of noise before adopting such harsh steps.
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Original source: https://www.traveldailymedia.com/iata-presents-2024-outlook-rising-profits-but-thin-margins-for-airlines/