African airlines are expected to continue generating losses in both 2023 and 2024. However, the losses are expected to narrow significantly despite the continent’s aviation market remaining relatively more difficult in which to operate an airline in terms of economic, infrastructure, and connectivity challenges. Notwithstanding these challenges, demand for African air travel remains robust.
This is according to the International Air Transport Association (IATA) that this week announced strengthened
profitability projections for airlines in 2023, which are expected to largely stabilise in 2024. However, net profitability at the global level is anticipated to be well below the cost of capital in both 2023 and 2024 as significant regional variations remain in financial performance.
Addressing a virtual media briefing yesterday, IATA’s Regional Vice President for Africa & Middle East, Kamil Alawadhi, expressed concern about Africa’s continued operational challenges and the fact that aviation fuel in Africa remains prohibitively more expensive compared to other global regions.
Meanwhile, global airline industry net profits are expected to reach US$25.7 billion in 2024, which is 2.7% of the net profit margin. That will be a slight improvement over 2023 which is expected to show a US$23.3 billion net profit or a 2.6% net profit
margin.
According to IATA, airline industry operating profits are expected to reach US$49.3 billion in 2024 from US$40.7 billion in 2023 while total revenues in 2024 are expected to grow 7.6% year-on-year to a record US$964 billion. Also, some 4.7 billion people are expected to travel in 2024, which is an historic high that exceeds pre-pandemic levels of 4.5 billion recorded in 2019. In addition, global cargo volumes are expected to be 58 and 61 million tonnes in 2023 and 2024, respectively.
“Considering the major losses of recent years, the US$25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience. People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity. The speed of the recovery has been extraordinary; yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo,” said Willie Walsh, IATA’s Director General.
“Industry profits must be put into proper perspective. While the recovery is impressive, 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 average, and many are struggling. But there is something to be learned from the fact that, on average airlines will retain just $5.45 for every passenger
carried.
That’s about enough to buy a basic ‘grande latte’ at a London Starbucks. But it is far too little to build a future that is resilient to shocks for a critical global industry on which 3.5% of GDP depends and from which 3.05 million people directly earn their livelihoods. Airlines will always compete ferociously for their customers, but they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies,” said Walsh.
IATA projections also show overall airline revenues in 2024 are expected to rise faster than expenses, thereby strengthening profitability. While operating profits are expected to increase by 21.1%, net profit margins increased at less than half the pace (10%) largely due to increased interest rates expected in 2024.