Upbeat forecast for global airline industry

Company News

by Glenn Dyer

Qantas (ASX:QAN), Bonza, and Air New Zealand (ASX:AIZ) will miss out, but their global peers are having a great 2024 if the latest earnings upgrade estimate from IATA, the world airline lobby group, is any guide.

Air NZ has been hit by an engine problem with Pratt and Whitney engines impacting Airbus planes, which is also affecting several other airlines. Additionally, weak domestic demand, as the Kiwi economy is crunched like Australia's by weakening demand and high interest costs and fuel charges.

Bonza, of course, collapsed last month, and with a month to go, Qantas is looking at a fall from 2022-213’s huge year, with the bill for several managerial missteps to be felt, especially on the silly sacking of 1780 staff during the pandemic and the ghost flights scandal costs and make goods.

But from the IATA (International Air Transport Association) update on Monday, our local trio looks like exceptions. The forecast is for global airline revenues to almost reach the $US1 trillion mark as a record number of travelers, around 5 billion passengers, fly this year.
IATA says it expects the worldwide industry to generate $US30.5 billion of profit this year, higher than the upwardly revised $27.4 billion in 2023 as carriers keep a lid on underlying labor costs despite recent strikes, and fuel costs prove to be volatile.

The new 2024 estimate is significantly higher (around 20%) than the $US25.7 billion forecast for 2024 profits that IATA released in December of last year.

That comes just four years after the pandemic drove the industry to a $US140 billion loss in 2020, with government support schemes and bailouts keeping the sector alive for more than two years.

Passenger yields - or the average amount paid by a passenger to fly one mile - are expected to strengthen by 3.2% compared with 2023, IATA said in its twice-yearly economic outlook. In part, that is because capacity growth is constrained by a shortage of planes, driving up average fares.

By contrast, the corresponding figure for cargo is expected to fall 17.5% in 2024 as the freight business returns to normal patterns after booming during the pandemic with heavy subsidies from governments trying to keep export and import supply chains of critical goods alive.

The IATA statement came at the group's annual meeting in Dubai over the weekend, with representatives of more than 300 members taking place.

But as upbeat as the forecast is, there’s a growing problem resulting from the continuing woes at Boeing - which other plane makers, led by Airbus, can’t offset.

The growing shortage of capacity - in the form of deliveries of new planes, especially from Boeing - is threatening to crunch the strong rebound in travel demand.

In Asia, IATA more than tripled its industry profit forecast for 2024 to $US2.2 billion, despite a sluggish recovery in international travel in China.

North America was unchanged at $US14.9 billion, and IATA says the region remains the most profitable with "strong consumer spending despite cost-of-living pressure."

Reuters reported over the weekend that Airbus, the world's largest plane maker, is now encountering its own supply problems, casting doubt on plans to boost output in the December half-year to help offset Boeing’s shortfall.

Reuters said Airbus says it is sticking by full-year delivery goals.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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