Rio de Janeiro (Brazil) (AFP) – Airlines expect to carry more passengers this year but earn only half as much profit as in 2025, as high fuel prices don’t appear to be fully deterring travel, according to projections published Sunday. The International Air Transport Association (IATA) predicted its 370 member airlines, which account for 85 percent of global air traffic, will carry 5.1 billion passengers this year. That is up 2.4 percent from 2025, when passenger traffic was estimated to have reached 4.98 billion. The four billion mark was surpassed in 2023.
Asked by reporters about the impact of the war in the Middle East compared to the Covid-19 pandemic in 2020-2021, IATA Director General Willie Walsh replied: “I don’t see this as a crisis.” “You’re looking at an industry that is forecasting growth,” he said. “If you extract the impact of the Middle East, we’re looking at growth of 3.5 percent.” This growth, however, will be accompanied by profitability only half as strong as last year’s, while Middle Eastern airlines are expected to post losses. “War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse,” Walsh said in a statement. “Profits will shrink from $45 billion in 2025 to $23 billion this year. And margins will shrink from 4.2 percent to 2.0 percent,” he said, referring to the net margin.
According to IATA’s calculations, net profit is expected to be $4.50 per passenger, half the 2025 figure. “Under the circumstances, that shows resilience. But it won’t even buy you a hot dog at most of the FIFA World Cup venues and it does not leave much of a buffer should other costs or taxes start rising,” Walsh said in the statement.
– ‘Fuel price shock’ –
With fuel costs rising — and those increases being passed on in part through higher ticket prices — the revenue of IATA member airlines is expected to grow nine percent this year, reaching $1.165 trillion. “Airlines are bearing the brunt of the fuel price shock. While air fares are rising, airlines are still absorbing part of the hike in their bottom lines,” the IATA said.
Profitability will vary across different regions of the world, according to the organization’s projections. Middle Eastern airlines, which have traditionally had access to an abundant supply of fuel, are expected to face a difficult year, with net margins projected to turn negative. For these airlines, including Emirates and Qatar Airways, “the immediate recovery path is likely to be driven more by pricing than by a rapid return of volumes,” the IATA said.
European airlines are expected to become the most profitable (3.1 percent net margin), followed by those in North America (2.5 percent) and Asia-Pacific (2.1 percent). Despite significant geopolitical uncertainty and the inability to predict the duration of the war, the IATA is not worried about demand. It noted that according to its calculations, the average airline ticket price had fallen 26 percent over the past 10 years.
© 2024 AFP
