Indian Transport & Logistics

IATA: Airlines’ cargo revenues to fall to $120 billion in 2024

According to the International Air Transport Association (IATA), airline cargo yields are expected to fall 17.5% in 2024.

IATA: Airlines’ cargo revenues to fall to $120 billion in 2024
Listen to this Article

At the 80th IATA Annual General Meeting and World Air Transport Summit 2024, hosted in Dubai, IATA announced airline profitability projections in 2024 compared with its June and December 2023 forecasts. Based on IATA’s projections, airlines are expected to see a drop in their cargo revenues from $138 billion in 2023 to $120 billion in 2024.

Even though both these numbers are significantly down from the peak of $210 billion in 2021, they are above 2019 revenues, which were $101 billion and an improvement on the previous forecast of $111 billion – announced in December 2023. Moreover, airlines’ cargo yields are expected to fall 17.5% in 2024, slightly above 2019 levels, despite the strength of cargo demands this year.

According to an official release by IATA, this is normalisation after extraordinary pandemic highs. IATA also states that a critical factor in this is the significant belly capacity that entered the market in 2023 with the recovery of passenger travel. “In general, air cargo is in a period of correction following an exceptional year in 2021. Yields, capacity growth, the belly-dedicated freighter split, and other key metrics are moving from the extraordinary mid-pandemic situation towards a continuation of pre-pandemic trends and levels,” states the official release.

Source: IATA

“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. Strengthening airline profitability and growing financial resilience is important. Profitability enables investments in products to meet the needs of our customers, and in the sustainability solutions we will need to achieve net zero carbon emissions by 2050,” said Willie Walsh, Director General, IATA.

According to the IATA report, based on responses from around 330 airlines comprising 80% of global air traffic, aviation revenues are expected to reach a historic high of $999 billion this year, with passenger revenues expected to reach $744 billion in 2024. The report found that passenger revenues are up 15.2% from $646 billion in 2023. Passenger yields are also expected to strengthen 3.2% over 2023.

However, industry expenses are expected to grow to $936 billion in 2024. Fuel, which accounts for 31% of all operating costs, is expected to average $113.8/barrel (jet) in 2024 – translating into a total fuel bill of $291 billion. While sustainable aviation fuel (SAF) production could rise to satisfy 0.53% of global demand for fuel in 2024, the cost of it will be $3.75 billion. That is $2.4 billion in addition to what it would cost to purchase the same quantity of jet fuel.

On the other hand, non-fuel expenses are expected to be the same as 2023 levels. “An inventory of 38.7 million flights is expected to be available in 2024. This is 1.4 million flights below previous estimates (December 2023) largely attributable to the slowing pace of deliveries in the face of persistent supply chain issues in the aerospace sector,” states the official release.

Source: IATA

“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,” states Walsh in an official release.

“To improve profitability, resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand. And 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. It would also place us in a strong position to accelerate investments in sustainability,” added Walsh.

Region-wise, North America continues to be the most significant contributor to industry profits, supported by a high passenger load factor. Europe also sees a positive outlook on performance, with demand expected to remain strong in 2024. However, supply chain issues, high interest rates and the risk of labour disputes, could limit the prospects for further near-term increases in profitability. In the Asia-Pacific region, there is still a lot of pent-up demand for cross-border travel, which will likely boost future growth prospects.

Latin America has seen a steady improvement in financial performance since 2020, even as the regional performance has been mixed. The Middle East region benefits from solid economies and global hubs, with the UAE attracting leisure and business travellers.

Saudi Arabia's significant investments in infrastructure and tourism drive robust growth in passenger and cargo volumes. Despite airlines adding capacity, yields and travel demand remain strong. Geopolitical risks pose the main threat, especially to Levant carriers, while Gulf carriers are less affected unless Iran-Israel tensions escalate.

Despite connectivity issues, a high operational cost, and a low propensity to spend on air travel in the African region, there is sustained demand for air travel, allowing the market to deliver a second year of profitability.

Read Full Article
Next Story
Share it