Airline margins ‘wafer thin’, says IATA’s Willie Walsh

Reuters/Ahmed Jadallah

• Revenues in 2024 ‘close to $1trn’
• But expenses will be $936bn
• Net profit margin just 3%

The profit global airlines make per passenger is only enough to buy a single espresso in a Dubai hotel coffee shop, according to Willie Walsh, the director general of the International Air Travel Association (IATA).

Global airlines are expected to make $30.5 billion in profits this year, but margins remain “wafer thin”, Walsh told the 80th annual general meeting of IATA in Dubai.

Walsh said that industry revenues will be close to $1 trillion in 2024, but expenses will also increase to a record high of $936 billion, representing a net margin of just over 3 percent.

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“Considering where we were just a few years ago, it’s a major achievement,” Walsh said.

He said that the real cost of air travel had fallen by a third in the past decade and that airlines were making just over $6 profit on every passenger.

“That can buy you a single espresso in this hotel’s coffee shop,” Walsh said. The meeting is being held in the JW Marriott Marquis Hotel in Dubai.

• Etihad Q1 profit jumps nine-fold on 41% traffic growth

• Turkish Airlines revenue rises 10% to nearly $5bn

• Emirates report record half-year profits

Sticking with the coffee theme, Walsh said Starbucks enjoys a net margin of 11.5 percent.

“The best our industry has ever achieved was 5 percent net margin in 2015 and 2017,” he said.

This year airlines will fly nearly 5 billion people, over 22,000 routes, involving 39 million flights. Some 62 million tons of cargo will be carried, making possible $8.3 trillion in trade, Walsh said.

“Governments who look to our industry for new tax revenues need to understand that our margins are wafer thin and we rarely earn our cost of capital,” he said.

“This year airlines on average will earn a 5.7 percent return on investor capital, well below the average 9 percent cost of capital.”

Middle East faring best

Middle East airlines fared much better than the global average, with a net profit margin of 4.9 percent ($12.70 per passenger) in 2023, which is expected to increase to 5.3 percent this year, according to IATA forecasts released this week.

Airlines in the Middle East reported a 14.2 percent year-on-year increase in demand in April, IATA statistics show, measured in revenue passenger kilometres.

Capacity, measured in available seat kilometres, increased 9.9 percent year-on-year and the load factor increased 3 percentage points compared to April 2023, to 79.3 percent.

Total global demand was up 11 percent. Total capacity was up 9.6 percent year on  year. The April load factor was 82.4 percent.