IATA’s Global Media Day 2023 took place on 6  December 2023 at IATA's Geneva Headquarters.  Aviation Turkey Magazine Editor in Chief, Ms. Ayşe Akalın is closely followed the  conference where global  aviation journalists attended  to for our readers in Geneva.

The agenda  included briefings on  2023 in review  and outlook for2024 , sustainable Aviation Fuel , noise and Slots, airline industry retailing and Cargo topics.

Willie Walsh, Director General, Marie Owens Thomsen , SVP Sustainability and Chief Economist and Andrew Matters, Director Policy and Economics informed press members about 2023 review and outlook for 2024.

Airlines Set to Earn 2.7% Net Profit Margin on Record Revenues in 2024

IATA announced strengthened profitability projections for airlines in 2023, which will then largely stabilize in 2024. However, net profitability at the global level is expected to be well below the cost of capital in both years. Very significant regional variations in financial performance remain.

Outlook highlights include:

Airline industry net profits are expected to reach $25.7 billion in 2024 (2.7% net profit margin). That will be a slight improvement over 2023 which is expected to show a $23.3 billion net profit (2.6% net profit margin).

In both 2023 and 2024 return on invested capital will lag the cost of capital by 4p.p., as interest rates around the world have risen in response to the sharp inflationary impulse.

Airline industry operating profits are expected to reach $49.3 billion in 2024 from $40.7 billion in 2023.

Total revenues in 2024 are expected to grow 7.6% year over year to a record $964 billion.

Expense growth is expected to be slightly lower at 6.9% for a total of $914 billion.

Some 4.7 billion people are expected to travel in 2024, an historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019.

Cargo volumes are expected to be 58 and 61 million tonnes in 2023 and 2024, respectively.

“Considering the major losses of recent years, the $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.

Overall revenues in 2024 are expected to rise faster than expenses (7.6% vs. 6.9%), strengthening profitability. While operating profits are expected to increase by 21.1% ($40.7 billion in 2023 to $49.3 billion in 2024), net profit margins increased at less than half the pace (10%) largely due to increased interest rates expected in 2024.

Industry revenues are expected to reach an historic high of $964 billion in 2024. An inventory of 40.1 million flights is expected to be available in 2024, exceeding the 2019 level of 38.9 million and up from the 36.8 million flights expected in 2023.

Passenger revenues are expected to reach $717 billion in 2024, up 12% from $642 billion in 2023. Revenue passenger kilometers (RPKs) growth is expected to be 9.8% year on year. While that is more than double the pre-pandemic growth trend, 2024 is expected to mark the end of the dramatic year-on-year increases that have been characteristic of the recovery in 2021-2023.

Cargo revenues are expected to fall to $111 billion in 2024. That is down sharply from an extraordinary peak of $210 billion in 2021, but it is above 2019 revenues which were $101 billion. Yields will continue to be negatively impacted by the continued growth of belly capacity (related to strong growth on the passenger side of the business) while international trade stagnates. Yields are expected to further correct towards pre-pandemic levels with a -32.2% decline in 2023 followed by a -20.9% decline expected in 2024. They will remain high by historical standards, however. Note that yield progression has been extraordinary in these last years (-8.2% in 2019, +54.7% in 2020, +25.9% in 2021, +7% in 2022, -32.2% in 2023).

Fuel price is expected to average $113.8/barrel (jet) in 2024 translating into total fuel bill of $281 billion, accounting for 31% of all operating costs. Airlines are expected to consume 99 billion gallons of fuel in 2024.

High crude oil prices are expected to continue to be further exaggerated for airlines as the crack spread (premium paid to refine crude oil into jet fuel) is expected to average 30% in 2024.

Industry CO2 emissions in 2024 are expected to be 939 million tonnes from consumption of 99 billion gallons of fuel.

The aviation industry will increase its use of Sustainable Aviation Fuels (SAF) and carbon credits to reduce its carbon footprint. We estimate that SAF production could rise to 0.53% of airlines’ total fuel consumption in 2024, adding USD 2.4 billion to next year’s fuel bill. In addition, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global market-based carbon offsetting mechanism designed to stabilize international aviation emissions. The CORSIA-related costs are estimated at $1 billion in 2024.

Risks for 2024:  Industry profitability is fragile and could be affected (positively or negatively) by many factors

Global Economic developments: Easing inflation, low unemployment rates, and strong demand for travel are all positive developments. Nonetheless, economic strains could arise. In China, for example, slow growth, high youth unemployment and disarray in property markets if not managed properly, could impact global business cycles. Similarly, should tolerance of high interest rates weaken, and unemployment rise significantly, the strong consumer demand that has supported the recovery could weaken.

War: The operational impacts of the Ukraine war and the Israel-Hamas war have been largely limited to re-routings due to airspace closures. On the cost side, the conflicts have pushed up oil prices which is impacting airlines globally. An unexpected peace in either or both cases would bring benefits to the industry, but any escalation could produce a radically different global economic scenario to which aviation would not be immune.

Supply Chains: Supply chain issues continue to impact global trade and business. Airlines have been directly impacted by unforeseen maintenance issues on some aircraft/engine types as well as delays in the delivery of aircraft parts and of aircraft, limiting capacity expansion and fleet renewal.

Regulatory Risk: On the regulatory front, airlines could face rising costs of compliance, and additional costs pertaining to passenger rights regimes, regional environment initiatives, and accessibility requirements.

SAF Volumes Growing but Still Missing Opportunities

• 2023 estimated share of SAF in total jet fuel consumption: 0,2% or 0.5 Mt HEPA

• 2050 minimum estimated demand for SAF500 mt (x1000 2023 output) HEPA, ATJ, FT, PTL

• 2022 : USD 20 bn- Less than 3% of capital budget, and around 1% of total clean energy investment globally

• USD 800 billion in oil and gas investments in 2023. Estimated top of the range investment needs per year in air transportation’s enegy transition= USD 150 Billion. One fifth or 19% of oil and gas investments need to be redirected

In 2023, SAF volumes reached over 600 million liters (0.5Mt), double the 300 million liters (0.25 Mt) produced in 2022. SAF accounted for 3% of all renewable fuels produced, with 97% of renewable fuel production going to other sectors. 

In 2024 SAF production is expected to triple to 1.875 billion liters (1.5Mt), accounting for 0.53% of aviation’s fuel need, and 6% of renewable fuel capacity. The small percentage of SAF output as a proportion of overall renewable fuel is primarily due to the new capacity coming online in 2023 being allocated to other renewable fuels.

“The doubling of SAF production in 2023 was encouraging as is the expected tripling of production expected in 2024. But even with that impressive growth, SAF as a portion of all renewable fuel production will only grow from 3% this year to 6% in 2024. This allocation limits SAF supply and keeps prices high. Aviation needs between 25% and 30% of renewable fuel production capacity for SAF. At those levels aviation will be on the trajectory needed to reach net zero carbon emissions by 2050. Until such levels are reached, we will continue missing huge opportunities to advance aviation’s decarbonization. It is government policy that will make the difference. Governments must prioritize policies to incentivize the scaling-up of SAF production and to diversify feedstocks with those available locally,” said Willie Walsh, IATA’s Director General.

The Third Conference on Aviation Alternative Fuels (CAAF/3) hosted by the International Civil Aviation Organization (ICAO) agreed a global framework to promote SAF production in all geographies for fuels used in international aviation to be 5% less carbon intensive by 2030. To reach this level, about 17.5 billion liters (14Mt) of SAF need to be produced.

“Governments want aviation to be net zero by 2050. Having set an interim target in the CAAF process they now need to deliver policy measures that can achieve the needed exponential increase in SAF production,” said Walsh.

Demand is not the issue: Every drop of SAF produced has been bought and used. In fact, SAF added $756 million to a record high fuel bill in 2023. At least 43 airlines have already committed to use some 16.25 billion liters (13Mt ) of SAF in 2030, with more agreements being announced regularly.

Unlocking supply to meet demand is the challenge that needs to be solved: Projections are for over 78 billion liters (63Mt) of renewable fuels to be produced in 2029. Governments must set a policy framework that incentivizes renewable fuel producers to allocate 25-30% of their output to SAF to meet the CAAF/3 ambition, existing regional and national policies as well as airline commitments.

Effective production incentives for SAF should support the following objectives:

Accelerating investments in SAF by traditional oil companies

Ensuring renewable fuel production incentives encourage sufficient SAF quantities

Focusing stakeholders on regional diversification of feedstock and SAF production

Identifying and prioritizing high potential production projects for investment support

Delivering a global SAF Accounting Framework

Unlocking Diversification

Approximately 85% of SAF facilities coming on line over the next five years will use Hydrotreatment (HEFA) production technology, which relies on inedible animal fats (tallow), used cooking oil and industrial grease as feedstock. Limited quantities of these necessitate policies to:

Diversify SAF production by increasing production through pathways already certified, in particular the Alcohol-to-Jet (AtJ) and Fischer-Tropsch (FT) which use bio/agricultural wastes and residue.

Promote investments in, and the fast-tracking of certification for, new SAF production pathways currently in the developmental phase.

Identify more potential feedstocks to leverage all SAF technologies to provide diversification and regional options, including those with side-benefits such as environmental restoration.

Passenger Support

A recent IATA survey revealed significant public support for SAF. Some 86% of travelers agreed that governments should provide production incentives for airlines to be able to access SAF. In addition, 86% agreed that it should be a priority for oil companies to supply SAF to airlines