The signs are pointing to a banner travel year in 2024
An industry spokesperson indicated that this projection of profit stabilization in 2024 is seen as a positive sign of the sector’s resilience following significant losses in recent years. Passenger numbers are expected to hit record highs, with anticipated revenues growing 7.6% from the previous year to reach $964 billion. It is estimated that approximately 4.7 billion passengers will travel in 2024, surpassing the pre-pandemic peak of 4.5 billion from 2019.
The return to travel has been robust, particularly in regions such as North America, the Middle East, and Europe, helping the airline sector recover from the massive downturn during the Covid-19 pandemic. However, the recovery has been offset by approximately four years of growth that the pandemic seems to have erased.
A major Anglo-German travel company has illustrated the resurgence in consumer demand, announcing a substantial increase in year-on-year earnings. This is alongside a positive projection for an earnings increase in the following year, which has positively influenced its share price.
Despite the optimistic indicators, the industry group has noted that operating profits, although expected to reach $49.3 billion in the coming year, will be challenged by the gap between the return on invested capital and the higher cost of capital driven by rising interest rates intended to counter inflation.
The industry spokesperson cautioned that, even with a promising recovery, the projected profit margins are relatively modest compared to other sectors, with an average retention of just $5.45 per passenger. This amount was metaphorically compared to the cost of a café beverage in London, emphasizing that it is insufficient for building a robust future for the vital global industry. This industry is said to underpin 3.5% of global GDP and provides direct employment for over three million individuals.
In conclusion, while fierce competition for customers is a constant in the airline industry, it continues to grapple with significant challenges such as regulatory burdens, fragmentation, elevated infrastructure costs, and a supply chain that comprises several oligopolistic entities.