Airlines still make little money post-Covid-19
Airlines probably retained on average just $5.44 (about R102) per passenger and have had a net profit margin of just 2.6% in 2023 despite a return to profitability by the industry in general after the knock it took during the Covid-19 pandemic, according to the International Air Transport Association (IATA).
“This net profit margin is far below what investors in almost any other industry would accept,” Willie Walsh, IATA’s director-general, said at its Global Media Day in Geneva.
That amount, he said, is not nearly enough to make the industry resilient in the wake of the pandemic, which cost it about four years of growth. “From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo.”
Total air traffic is within 2% to 2.5% of its 2019 level, according to Andrew Matters, IATA’s director of policy and standards, sustainability and economics.
“We are just about there in terms of traffic. Given the share of fuel as part of airline costs, we are keeping a close eye on the oil and jet fuel market,” Matters said in his presentation.
IATA expects the jet fuel price to average $113.8 a barrel in 2024 — a total fuel bill of about $281bn for the industry — or 31% of airlines’ operating costs.
IATA expects African airlines to show a combined net loss of about $500m this year and narrowing to about $400m next.
Still, IATA said passenger demand on the continent was robust and is expected to increase about 7.3% in 2024 compared with 2023 levels. That would be 3% higher than before the pandemic struck in 2019. Airline capacity on the continent is expected to be 9.4% higher in 2024 compared with 2023 and also 3% more than before the pandemic in 2019.
Africa remains a difficult market for airlines to operate in, with the biggest challenges being presented by economic situations, infrastructure and connectivity, IATA said.
On a global level, airlines face challenges such as a crunch in the delivery of new aircraft — which Walsh said is “frustrating”. Airlines have also been affected by unforeseen maintenance issues on some aircraft or engine types and delays in the delivery of aircraft parts or of aircraft, limiting their capacity expansion and fleet renewal.
As for ticket prices, IATA’s data shows competition continues to drive benefits for consumers. The average real return fare in 2023 is expected to have been about 20% lower than that of 2019, despite rising costs, especially that of fuel.