December 2023

Global Outlook for Air Transport

A local sweet spot
2 Global Outlook for Air Transport — A local sweet spot

Contents
Global Outlook for Air Transport — A local sweet spot 3

1. Long-term trends are becoming less supportive 4

2. Air transportation is back, but the pace of growth will slow 10

Air passenger traffic 10

Air cargo traffic 14

3. Airline Financial Performance 16

Overview 16

Revenue development 18

Capital providers 18

Aircraft 19

Labor 20

Fuel 20

Regions 21

Risks 23
3 Global Outlook for Air Transport — A local sweet spot

Global Outlook for Air Transport

A local sweet spot
This semi-annual report takes a broad look at developments in the airline
industry, the context in which it is operating, and the challenges it is facing.

Main takeaways:

• The global long-term trends that propelled the 20th • The net profit forecast for the whole industry this year is
century’s unparalleled economic achievements are if not USD 23.3 billion. While this is a positive development, the
in reverse, certainly becoming less supportive. Much of levels of profitability are far from being exceptional. For
the 20th century’s success was enabled by the expanded some perspective, nearly half this amount was realized
use of fossil fuels. That economic model has passed its by one single oil company in just the third quarter of this
zenith. It will take a successful energy transition to set the year, while a large technology company nearly matched
world on a new path towards sustained – and sustainable – our full-year industry profits in that single quarter. Air
growth and better economic outcomes for all. transportation’s net profit margin is a slim 2.6% in 2023,
compared to 11% and 22% for the companies just
• 2023 has been a year when air transportation very nearly mentioned, respectively. Airlines’ profits in 2023 equate
returned to its pre-pandemic pace of activity, and a to USD 5.44 per passenger – less than a cup of cold brew
year of renewed financial profitability for the industry. coffee in Geneva. While stunningly resilient, our industry is
In many ways, 2023 is likely to be a local sweet spot for still lacking in robustness.
the industry, as the same pace of growth and financial
recovery is unlikely to be matched in 2024 and beyond. • Passengers around the world have clearly voted with
their wallets, showing the world that they deem air
• Industry-wide passenger traffic, measured in revenue transportation necessary, even in the face of record-high
passenger-kilometers (RPKs), grew by 40.1% year-on-year jet fuel prices in relation to crude oil prices. Passenger
(YoY) through September 2023 and reached 92.9% of satisfaction is as high as 82% in a survey of 8,000
pre-pandemic levels. All regions, except Asia Pacific, are air travelers 1, and 91% say that air transportation is
expected to reach or surpass their 2019 traffic levels in necessary 2. Our world needs to be connected, and air
2023. In the long run, global passenger traffic looks set to transportation is a necessary and indispensable form of
double by 2040. connectivity. The top line development in our industry
shows how important air transportation is, and the
• The cargo sector continued to face challenges in 2023, industry has been able to meet expectations, bouncing
with a slowdown in demand due to macro-economic back so rapidly from a near total halt.
headwinds and a slowdown in global trade. Despite a
decline in cargo tonne-kilometers (CTKs) from 2022 levels, • However, the industry remains the weakest link in the
signs of improvement emerged in the second half of 2023. aviation value chain and the expected net profits also
Regional variations were observed, with Latin America reveal its vulnerabilities. In the short term, airlines need to
achieving annual growth in CTKs, and North America and improve their profit margins and strengthen their balance
Africa surpassing their pre-Covid levels. Overall industry sheets after the pandemic. In the longer term, ensuring
CTKs are expected to remain below 2022 levels in 2023, air transportation’s access to renewable energy sources
with a forecast 4.5% growth in 2024. will allow our industry to play its full part in creating a
growing global economy that is sustainable, inclusive, and
• The industry is returning to profitability in 2023, only three equitable.
years after the historic loss of nearly USD 140 billion in
2020. This is a stunning performance and a testimony
to the industry’s resilience, adaptability, and hard work.
Total airline revenue is expected to reach 107% of 2019
earnings, with operating profits of USD 41 billion.

1 IATA 2023 Global Passenger Survey (GPS).

2 IATA Passenger Trends and Insights 2023. The IATA passenger insights survey was conducted 26 April 26-3 May 2023 with a sample of 4,700 recent travelers.
It covers 11 markets (Australia, Canada, Chile, France, Germany, India, Japan, Singapore, UAE, US, and UK). Sample size in each market was 500 apart from Chile,
Japan, Singapore and UAE where it was 300. This Is Motif Ltd prepared the questionnaire and analysis based on data collection and tabulation by Dynata
http://www.thisismotif.com
4 Global Outlook for Air Transport — A local sweet spot

1. Long-term trends
are becoming less supportive

Taking the long view, over up to 100 years, it must be said that Political regimes
the 20th century arguably delivered history’s most stunning While not an absolute determinant, economic growth is more
progress in terms of improved economic outcomes globally. likely to be sustained under democracy than under autocracy 3.
The number of persons living in poverty fell dramatically and The share of electoral and liberal democracies in all the world’s
global income distribution became more equitable than ever political regimes was as high as 54.3% in 2004, for instance.
before. This was possible thanks to many factors, including It then declined progressively to 50.5% in 2022. Closed and
the radical advances in transportation and communications electoral autocracies made up the remaining 49.5% of the
which brought down the cost of transporting goods and world’s political regimes.
services around the globe, and facilitated the dissemination
of knowledge and ideas. In the wake of the Second World Conflicts
War, the rules-based international world order that emerged The Uppsala Conflict Data Program reports that 2022 saw
along with enduring peace provided the backdrop against the highest number of violent conflicts since the Second
which cross-border activity could flourish. A further enabling World War. State-based conflicts number 56, up from a 2010
trend was the spread of democracies around the world low of 30. The global economic impact of violence was put
and the economic policies frequently associated with this at USD 14.4 trillion in 2020 by the Institute for Economics
phenomenon (Chart 1). & Peace 4. Applying the observed increase in state-based
conflicts to this number, the cost is likely to have exceeded
From where we currently stand in the 21st century, many of the USD 15 trillion in 2022, or 15% of 2022 nominal world GDP.
favorable conditions that contributed to the past century’s In addition to the cost inflicted upon warring nations, there is
success seem to be waning. Unhelpful long-term trends are also the opportunity cost of military spending. World military
not necessarily driving the business cycle, and economic spending rose to USD 2.2 trillion in 2022, adjusted for inflation,
performance can still both overwhelm and underwhelm at the highest level ever recorded in SIPRI data, and equivalent to
any given point in time. However, we will be able to assess the 2.2% of global GDP 5. That is money that could have covered
business cycle’s oscillations with greater clarity if put into the more than half of the estimated worldwide annual clean
context of the emerging structural trends. energy investments needed to deliver the energy transition,
according to the International Energy Agency, not to mention
the benefits it could have brought to schools, health systems,
infrastructure, and many more productive areas 6.

Chart 1: Political regimes

100%
Closed autocracies

80%

Electoral autocracies

60%

40%
Electoral democracies

20%

Liberal democracies

0%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2022

Source: OWID based on Lührmann et al. (2018)

3 Patrick A. Imam and Jonathan R. W. Temple, “Political Institutions and Output Collapses”, IMF Working Paper WP/23/36, February 2023.
4 Institute for Economics & Peace, Business & Peace Report 2021: Peace: A Good Predictor of Economic Success, Sydney, May 2021.
5 Nan Tian et. Al., “Trends in world military expenditure, 2022”, SIPRI Fact Sheet, Stockholm International Peace Research Institute, April 2023.
6 “Net Zero by 2050”, IEA, May 2021.
5 Global Outlook for Air Transport — A local sweet spot 1. Long-term trends are becoming less supportive

Navel gazing
These evolutions will as a rule promote more inward-looking Turning from trade to capital, the flows of foreign direct
economic policies or force such behavior upon economies investments (FDI) have been on a downward trend since 2007
suffering conflict. Signs that this might be happening can and declined by 24% in 2022 compared to 2021 (Chart 3). Both
be found in the decline in the real (inflation adjusted) world mergers and acquisitions (M&A) and greenfield investment
exports-to-GDP ratio (Chart 2). This ratio peaked at 103% in projects contribute to the weaker trend in this form of cross-
2008 and fell back to 98% in 2022. World trade can of course border activity. Moreover, M&A activity is fairly concentrated in
slow for many reasons other than the direct impacts of political a handful of countries. Nearly half of total M&A activity in 2022
regimes and violent conflict. Trade fluctuates in response to concerned only five advanced economies: the UK, the US,
changes in the composition of trade, slower GDP growth, the Australia, the Netherlands, and Sweden.
nature of trade regimes, and evolutions in global supply chains,
for instance. These factors too though are themselves often Some of these developments have of course been influenced
influenced by trends in political regimes and armed conflicts. by the Covid pandemic. In the general trend towards more
It is noteworthy in this context that the IMF counts nearly 3000 inward-looking economic policies, the pandemic disrupted
new trade barriers imposed globally in 2022 – a threefold supply chains and exacerbated the fragmentation that we can
increase from 1000 such measures taken in 2019 7. observe in both trade and cross-border investment.

Chart 2: Real World Exports-to-GDP ratio, indexed (2015 = 100)

110% 2008
103% 2022
98%
100%

90%

80%

70%

60%

50%

40%

30%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Sources: WTO Stats and World Bank World Development Indicators

Note: The ratio is the world export volume index over world GDP in constant 2015 US dollars index

Chart 3: Global foreign direct investment flows, USD billion (left) and % of GDP (right)

2500 Percent of GDP (RHS) Percent of GDP (RHS) 4.5%

4.0%
2000

3.5%

1500
3.0%

2.5%
1000

2.0%

500
1.5%

0 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: OECD – Global foreign direct investment flows

7 “The High Cost of Global Economic Fragmentation”, IMF, August 2023.

6 Global Outlook for Air Transport — A local sweet spot 1. Long-term trends are becoming less supportive

Fewer of us Climate change

Simultaneously, the world is seeing a declining rate of Climate change itself will likely weigh on the potential GDP
growth in the working-age population (Chart 4). The average growth rate. Worsening climate conditions looks set to reduce
global GDP growth rate since the 1970s, when the working the number of hours worked as well as the effectiveness of
population hit a trough, has been around 3%. All other things labor 11. Natural disasters will bring infrastructure costs in
being equal, a drop in the working-age population would point their wake. As many as 376 million persons have been forcibly
to a lower GDP growth rate going forward. Of course, other displaced since 2008 because of climate events and natural
things are rarely equal, and technological progress, coupled disasters, with a record 32.6 million people in 2022 alone,
with the drop in transportation costs which accelerated the according to the Internal Displacement Monitoring Centre. IEP,
dissemination of new technologies, allowed output growth the Institute for Economics & Peace, predicts that 1.2 billion
to outpace population growth since the 1970s. Total factor people could be displaced globally by 2050 due to climate
productivity, or the ratio of output over the combined inputs change and natural disasters. The likely associated increased
of capital and labor, as well as technology and innovation and social tensions will only reinforce the already discernable
the resulting impacts on efficiency, has flattened out since the trends of more political and economic fragmentation, capping
Global Financial Crisis and is weakening in mature economies economic growth rates further.
(Chart 5). In this, we can see signs of the weaker investment
and working population trends.

Declining potential GDP growth

All this points to lower potential GDP growth. The US
Congressional Budget Office estimates the US’ potential
growth rate at 1.8% at the end of 2023, down from 6% in 1952 Chart 5: Total factor productivity (index, 1995 = 100)
(Chart 6). The Carnegie Endowment for International Peace
110
expects China’s long-term growth rate too will be situated in
the vicinity of 2% 8. In the European Union, the potential growth
rate is likely lower, at around 1.5%, while in Japan it is probably
lower still, at around 1% 9. Globally, long-term growth might
be just over 2% annually 10. That is most unfortunate because 105
of the many challenges that lie ahead, and none of those are
greater than that of climate change.

100

95
1995 1999 2003 2007 2011 2015 2019 2023

Source: Total economy database

Chart 4: Global working age population, % of total population Chart 6: US real potential GDP growth rate

66% 7%

65%
6%
64%

63% 5%

62%
4%
61%
3%
60%

59% 2%

58%
1%
57%

56% 0%
1950 1960 1970 1980 1990 2000 2010 2020 1950 55 60 65 70 75 80 85 90 95 2000 05 10 15 20 2025

Source: OECD Source: Federal Reserve Bank of St. Louis, US Congressional Budget Office

8 Michael Pettis, “Can China’s Long-Term Growth Rate Exceed 2-3%?”, Carnegie Endowment for International Peace, April 2023.
9 Arsov and Watson, “Potential Growth in Advanced Economies”, Reserve Bank of Australia, December 2019.
10 “Falling Long-Term Growth Prospects: Trends, Expectations, and Policies”, World Bank, March 2023.
11 Dasgupta et. Al., “Effects of climate change on combined labour productivity and supply: an empirical, multi-model study”,
The Lancet Planetary Health, July 2021.
7 Global Outlook for Air Transport — A local sweet spot 1. Long-term trends are becoming less supportive

Restricted policy space

With greater relevance to the current business cycle, this If global fiscal expansion is limited, it could have been possible
situation could have been mitigated by expansionary fiscal to expect monetary policy to be more accommodative.
and monetary policies. The room for further fiscal expansion However, the combination of tight labor markets and sticky
is limited given that total global debt (household, corporate, prices is likely to keep nominal interest rates relatively high for
and government) rose to a new record high of USD 307 the foreseeable future. This is a departure from the unusual
trillion in the first half of 2023, according to the Institute of low-interest-rate era that followed the Global Financial Crisis
International Finance, bringing the global debt-to-GDP ratio and that closed with the US Federal Reserve’s first interest-
to 336% 12. General government debt has fallen somewhat in rate hike in this cycle in March 2022. Real, inflation-adjusted,
advanced economies, to 112% of GDP in 2022, from 123% in policy rates are still low in most countries, given the relatively
2020, though still higher than the 104% of GDP recorded in high rates of inflation, notably in the US and in Europe (Chart
2019 13. In the US, the ratio was 121% in 2022, higher than in 7). Financial conditions have more room to ease in China,
France, Spain, and Portugal, and only 23 percentage points for instance, particularly given China’s 0% inflation rate as of
lower than Italy’s 144%. The number of countries in debt September 2023 16. However, all the trends discussed here
distress in the world has doubled from 2015 levels, a problem point to structurally higher inflation than the three-decades-
that could point to local, if not global, financial instability 14. long low inflation environment the world experienced broadly
China’s room for fiscal expansion is also limited, not because since the 1990s.
of a high general government debt to GDP ratio, 77% in 2022,
but because total government debt is likely around 140%
of GDP 15. Moreover, China’s tax system depends upon an
investment-led growth model, reliant on property taxes, that
is no longer delivering the necessary revenue. Tax reform
should be addressed, but this would need to entail new
taxes on households and consumers, in turn limiting a more
consumption-led economic growth model. Given the global
debt burden, it is most likely that global taxation will continue
to increase going forward.

Chart 7: US nominal policy- and real interest rates, and inflation (CPI)

25% Policy Rate, US Federal Reserve US Inflation Rate Implied Real Interest Rate

20%

15%

10%

5%

0%

-5%

-10%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2023

Source: MacroBond

12 “Global Debt Monitor”, IIF, September 2023.

13 “Fiscal Monitor”, IMF, October 2023.
14 “Debt Dynamics”, IMF Annual Report 2022.
15 Quinn and Wright, “The Myth of China’s Fiscal Space”, Rhodium Group, August 2023.
16 “Global Financial Stability Report: Financial and Climate Policies for a High-Interest-Rate Era”, IMF, October 2023.
8 Global Outlook for Air Transport — A local sweet spot 1. Long-term trends are becoming less supportive

Going green
As uncertainty increases and the economic and political
landscape becomes more fragmented, risk appetite will fall,
and money will flow to relatively safer havens. Unless the world
loses faith in the US economy, and abstracting from fluctuations
in the business cycle, the US dollar – affectionately called “the
greenback” – is most likely to continue to be the world’s preferred
safe-haven asset. This will tend to increase the value of the US
dollar versus most other currencies. Trade weighted and inflation
adjusted, the US dollar is now around 25% stronger versus its
trading partners’ currencies than in 2010 (Chart 8). This too tends
to have a dampening effect on global growth in most regions.

Chart 8: Real Effective Exchange Rates (2010=100)

140

130

120

120

100

90

80
Brazil
70
Euro Area
60 Japan
Turkey
50 United Kingdom
United States
40 Switzerland

30
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sources: BIS, Macrobond

9 Global Outlook for Air Transport — A local sweet spot 1. Long-term trends are becoming less supportive

Set me free 17
In sum, the longer-term and structural trends that we see in Yet it is precisely the energy transition that could reverse the
the global economy point to reduced cross-border activity, a unhelpful long-term trends and propel the global economy
lower GDP growth potential, and greater economic and political into a new era of improved economic outcomes for all. A world
fragmentation. The associated more inward-looking economic set free of its energy constraint would be something utterly
policies will likely lead to structurally higher inflation and nominal unprecedented. Abundant, sustainable, and cheap energy
interest rates. Tax burdens are destined to grow because of the accessible to all would have a profound and transformational
lack of economic growth and high debt obligations. Conflict and impact on politics and economics in the world. To be sure, new
climate issues will heighten the appeal of safe-haven assets challenges would arise. But the energy transition is the one
such as the US dollar. Such an outlook begs the question of overarching objective that all our world leaders, regulators,
whether the world will be able to deliver a successful energy and all of us must pursue with single-minded focus, without
transition and replace most of the fossil fuels used today with compromise, and with unwavering persistence.
renewable fuels. Indeed, the IEA’s estimate of USD 4 trillion per
year of annual investments in renewable energy that such an
outcome would necessitate looks vastly more challenging in a
low-growth economy. Nevertheless, it is possible. Technological
change could surprise on the upside and progress could come
more rapidly than currently expected. Policies could become
more supportive of the energy transition, and capital could
reallocate more swiftly than anticipated. All stakeholders need
to unite in the effort, including the oil and gas sector. Today
only the smallest of fractions of the oil and gas industry’s
recent unprecedented cash flow is allocated to clean energy
technologies, while dividends and share buybacks have reached
record highs (Chart 9).

Chart 9: Distribution of cash spending by the oil and gas industry

Oil and gas capital expenditure Low-carbon capital expenditure Dividends plus buybacks minus issuances Net debt repaid

100%

80%

60%

40%

20%

0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: World Energy Investment, 2023, IEA 2023

17 The Supremes, “You Keep Me Hangin’ On”, 1967.

10 Global Outlook for Air Transport — A local sweet spot

2. Air transportation is back,

but the pace of growth will slow

Air passenger traffic

Recent development and outlook
Global demand for air travel remained strong in 2023, with the The passenger load factor (PLF), a measure of airline seating
industry steadily approaching 2019 levels of passenger traffic. capacity utilization, has steadily improved since its low point
Following a significant 64.9% YoY upturn in 2022, industry- in 2020, converging to pre-pandemic levels by the end of
wide passenger traffic, measured in revenue passenger- 2022. The global PLF reached 82.3% during the first nine
kilometers (RPKs), surged by 40.1% in the first nine months months of 2023, which is broadly in line with the load factor
of 2023, compared to the same period in the previous year. achieved during the same period in 2019. This underscores
This strong performance was reflected across all regions, the delicate balance between demand and capacity that
with North American carriers leading the recovery, benefiting airlines maintain as air travel recovers globally. During this
from an early reopening and robust domestic demand. The period, airlines in Africa, the Middle East, and Latin America
reopening of Chinese markets in January also played a pivotal surpassed their respective pre-pandemic PLFs, indicating
role in accelerating global passenger traffic recovery in 2023, enhanced operational efficiency for the carriers in these
particularly reviving travel in the Asia Pacific region (Chart 10). regions (Chart 11).

Chart 10: RPKs per airline region of registration, year-to-date % annual change (January – September)

Year-to-date growth Year-to-date growth vs 2019

104.9 %

44.4%
40.1%
37.3%

22.9%
18.8% 16.9%

1.4%

-3.2% -0.3%
-5.7% -7.1%
-8.5%
-15.8%

Asia Pacific Africa Europe Middle East Latin America North America Industry

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

Chart 11: Passenger Load Factor by airline region of registration, year-to-date % share of available seat-kilometers (ASKs) (January – September)

2019 2022 2023

85.5% 84.3% 82.7% 81.5% 82.9% 85.1% 83.1% 84.7% 82.9%

82.0% 79.9% 80.4% 80.3% 82.3%
76.7% 74.2% 77.8%
69.5% 72.0% 70.9% 73.2%

Asia Pacific Africa Europe Middle East Latin America North America Industry

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

11 Global Outlook for Air Transport — A local sweet spot 2. Air transportation is back, but the pace of growth will slow

Pent-up passenger demand continued to boost domestic air Air passenger traffic across the regions has nearly returned to
travel in 2023, sustaining growth even after surpassing pre- pre-pandemic levels. Globally, the number of air passengers
pandemic levels in April. The recovery in domestic traffic was is projected to recover fully to 2019 levels by the end of 2024
significantly helped by China’s reopening, marking the end of (Chart 13).
its zero-Covid policy which had been in place for the previous
three years. As China’s domestic market contributes over All regions are expected to reach their pre-pandemic
25% to global domestic RPKs, the reopening had a substantial passenger levels by the end of 2023, except for Asia Pacific,
impact on restoring global domestic RPKs, which stood 5.0% where full recovery is anticipated in early 2024, as the gradual
above 2019 levels in September 2023 (Chart 12). ramp-up of airline operations and the return of tourism are
poised to drive further growth in this region.
Despite the slower reopening of international markets,
international RPKs also experienced rapid expansion in2023, Chart 13: Regional passenger totals, % share of 2019 levels
growing to a level that in September 2023 sits only 7% below
2022 2023 2024 2025
the equivalent figure for 2019. As a result, total passenger
traffic, including both domestic and international across 87%
the industry, was just 2.7% below the levels observed in Africa
108%
109%
September 2019 (Chart 12). A complete recovery appears 115%
imminent, contingent upon the restoration of international
55%
connectivity to and from the Asia Pacific region. Other 94%
Asia-Pacific
factors, including the wars in Ukraine and the Middle East 110%
124%
and their associated potential to restrict airspace and impact
on international operations, will continue to influence the 82%
evolution of international traffic. Europe
102%
108%
115%

85%
104%
Middle East
Table 1: Air passenger forecast summary 112%
122%

Recovery CAGR Additional passengers

Region 87%
year (2019 - 2040) by 2040, millions 100%
North America
Africa 2023 3.6% 169.7 106%
112%
Asia Pacific 2024 4.5% 2,536.8

Europe 2023 2.2% 701.4 95%

Latin America 108%
Middle East 2023 3.6% 264.1 & Caribbean 113%
119%
North America 2023 2.2% 558.5
Latin America 74%
2023 2.8% 304.0 99%
& Caribbean World
109%
World 2024 3.4% 3,923.0 119%

Sources: IATA Sustainability and Economics, Tourism Economics Sources: IATA Sustainability and Economics, Tourism Economics
(September 2023 release) (September 2023 release)

Chart 12: Industry RPKs, % YoY change compared to 2019 levels

20% Domestic International Total

0%

-20%

-40%

-60%

-80%

-100%
May

Nov

May

Nov

May

Nov

May
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep

2020 2021 2022 2023

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

12 Global Outlook for Air Transport — A local sweet spot 2. Air transportation is back, but the pace of growth will slow

Over a longer horizon, the Asia Pacific region is likely to see

the most rapid growth in passenger traffic among all regions.
An annual increase of 4.5% in the number of passengers is
forecast for the region between 2019 and 2040, bringing
the regional total to over 4 billion in 2040, at which point the
region would make up more than half of global passenger
demand (Table 1). India, in particular, is expected to contribute
significantly to this growth, with a forecast annual passenger
growth rate of 6% over the same horizon, resulting in an
additional half a billion air passengers per year over the next
20 years.

At a global level, air passenger growth will continue to

increase, but at a slower pace compared to that experienced
during the past 3 years. Between 2023 and 2040, the number
of air passengers is forecast to increase by 4.2% annually.
This would be a radical slowdown from the exceptional
36% annual growth rate seen over the past three years, as
markets emerged from the depths of the Covid crisis. Having
restored traffic to pre-pandemic levels, this deceleration will
nevertheless allow the number of industry-wide air passenger
journeys to more than double from the 2019 level, to reach 7.8
billion by 2040.

There is of course a considerable range of uncertainty around

any such long-term forecast. On the upside, air passenger
demand could benefit from more favorable macro-economic
conditions such as normalizing supply chains and lower
inflation rates, allowing for an earlier unwinding of the current
monetary policy tightening. Conversely, on the downside, risks
prevail regarding the strength of the business cycle and the
impact and extent of the wars in Ukraine and the Middle East.
These could cap the available airspace and curtail growth in
international traffic, especially on routes between Europe and
Asia Pacific (Chart 14).

Chart 14: Global air passenger journeys, billion

10 UP: Air passenger demand benefits from more favourable macroeconomic conditions

DOWN: Weaker macroeconomic conditions inflict lasting damage

9
Baseline
8

0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041

Sources: IATA Sustainability and Economics, Tourism Economics (September 2023 release)
13 Global Outlook for Air Transport — A local sweet spot 2. Air transportation is back, but the pace of growth will slow

Connectivity and contribution to the wider economy

Air transport is a necessary and important contributor to IATA’s connectivity index measures scheduled passenger
global economic development. The returning connectivity capacity weighted by the economic scale of destinations
between countries and cities – enabling the flow of goods, served (Chart 15). International connectivity has recovered
people, capital, technology, and ideas, supports the global to 89.5% of pre-pandemic levels and domestic connectivity
business cycle and helps mitigate the many mounting clouds to 97.5%, an increase of 12 percentage points compared to
on the horizon (Table 2). 2022. Connectivity has been impacted by the restrictions
related to flying to and from Russia. At the global level,
The Covid pandemic brought an abrupt and substantial the effect is limited but regionally and for specific trading
decline in connectivity in 2020, with the number of unique partners and key markets, traffic has been disrupted in a more
city pairs falling by more than 28% and eliminating almost substantial manner. Overall and following the reopening of the
6,000 routes. The recovery since that time has been more Chinese market, the international recovery in air connectivity
subdued, as travel restrictions were removed gradually and is expected to improve further in 2024.
unequally around the world. Despite the observed recovery in
the number of city pair routes, it is important to note that the
frequency of service on those routes is slower to be restored
to pre-pandemic levels, and the return of capacity will lag the
recovery in the absolute number of city-pair connections

Table 2: The wider economic contribution of air transport

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

Unique city pairs 21,736 15,621 16,846 19,665 21,985 22,976

compared to 2013 30% -10% -5% 6% 12% 10%

Real price, USD/RTK 2018USD 77.6 73.1 77.6 77.2 70.2 66.8

compared to 2013 -31% -35% -31% -31% -38% -41%

Value of trade carried, USD billion 6,482 5,961 7,570 8,486 8,052 8,025

% change over year -2.7% -8.0% 27.0% 12.1% -5.1% -0.3%

Source: IATA Sustainability and Economics

Chart 15: IATA Global Air Connectivity Index, Jan 2020 – Sep 2023, 2019 = 100

120

97.5
100

80 Domestic 89.5

60

40
International

20

0
May

Nov

May

Nov

May

Nov

May
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep
Oct

Dec
Jan
Feb
Mar
Apr

Jun
Jul
Aug
Sep

2020 2021 2022 2023

Source: IATA Connectivity Index, using data from OAG

14 Global Outlook for Air Transport — A local sweet spot 2. Air transportation is back, but the pace of growth will slow

Air cargo traffic

Following a robust performance during the pandemic passenger aircraft belly-hold capacity on international routes.
and especially in 2021, global air cargo demand faced Consequently, global air cargo capacity surpassed the pre-
considerable challenges in 2022, including a slowdown in Covid level in April 2023. As of September, industry wide
global trade and economic growth, the war in Ukraine, high ACTKs exceeded its pre-pandemic level by 4% (Chart 17).
inflation in key markets, and elevated global oil prices, all
of which exerted significant downward pressure on cargo Passenger aircraft belly-hold capacity as a share of total
markets. ACTKs has risen to 49% year-to-date (YTD) in 2023, from a
low of 20% in 2020 (Chart 17). Over the past two years, the
Industry-wide cargo tonne-kilometers (CTKs) started to capacity for international cargo transported in the belly space
contract in early 2022, and fell every month until the middle of passenger aircraft has risen markedly, nearly doubling
of 2023. Although trade and exports have remained sluggish, its proportion relative to the diminishing role of dedicated
CTKs have managed to rebound since then, improving from cargo aircraft. In the meantime, the temporary conversion of
the double-digit declines earlier this year to almost 2% YoY passenger aircraft to cargo carriers (termed “preighters”) has
growth as of September (Chart 16). been phased out. The incoming capacity in the belly hold of
passenger aircraft has caused a decrease in the cargo load
Cargo capacity, measured in available cargo tonne kilometers factors (CLF) on international routes. The downward trajectory
(ACTKs), nevertheless expanded consistently since the of CLFs will likely stabilize once passenger and cargo traffic
beginning of 2023, driven mostly by the resurgence of levels realign with pre-pandemic norms.

Chart 16: Seasonally adjusted global ACTK and global CTK, billions

55

50

45

40
Global ACTK
35

30

25
Global CTK
20

15

10

0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

Chart 17: Recovery trends in international air cargo traffic and capacity, total international cargo by business type, 2019-2023 Q1-Q3

Milions
500 Dedicated Freighters Preighters Passenger Belly

450 425.3

400 387.1
370.5
350 329.2
311.9
26%
300 59% 41%
29%
250 236.7 13%
220.7 217 49%
195.7 20% 10% 5%
200
20% 30% 154
48% 16%
150 13% 7%
38%
100 61% 54%
60%
41%
64% 64% 51%
52% 67%
50 62%

0
2019 2020 2021 2022 2023 Q1-Q3 2019 2020 2021 2022 2023 Q1-Q3
Cargo Tonne Kilometers (CTKs) Available Cargo Tonne Kilometers (ACTKs)

Source: IATA Connectivity Index, using data from OAG

15 Global Outlook for Air Transport — A local sweet spot 2. Air transportation is back, but the pace of growth will slow

Among the top five route areas, which represented 75% of Industry CTKs fell short of the pre-Covid level by 4.7%
international CTKs in 2019, three remained resilient through (Chart 19). Latin America is the only region to achieve growth
September 2023. The Asia Pacific-North America, Europe- in YTD CTKs compared to 2022, even though the region’s
North America, and Asia Pacific-Middle East route areas cargo demand stands 2.4% below 2019 levels. Compared to
consistently maintained CTKs above their pre-pandemic 2019, the regions of North America and Africa were the only
levels in the first half of 2023. This sustained performance ones to see higher CTKs on a YTD basis in 2023.
underscores their resilience in the face of broader market
challenges.

In contrast, reflecting the slowdown in regional economies as

well as geopolitical conflicts, the Asia Pacific-Europe and the
within Asia Pacific markets remained below their 2019 CTK
levels throughout the January to September 2023 period
(Chart 18).

Chart 18: International CTKs by route area – top 5 route areas (indexed, 2019 = 100)

180 Asia Pacific-North America (Rank 1: 26.5%)

Asia Pacific-Europe (Rank 2: 19.0%)
Europe-North America (Rank 3: 14.9%)
160 Within Asia Pacific (Rank 4: 7.4%)
Asia Pacific-Middle East (Rank 5: 6.9%)
140

120

100

80

60

40
2020 2021 2022 2023

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

Notes: Rankings are based on the route area shares of 2019 international CTKs (% shares are provided in parentheses)

Chart 19: Year-to-date (Q1-Q3) 2023 CTKs compared to the same period in 2022 and 2019

10% 9.2% Q1-Q3 2023 vs. Q1-Q3 2022 Q1-Q3 2023 vs. Q1-Q3 2019

6.2%

5%

1.1%
0%

-1.9% -2.4%
-3.1% -3.2% -3.3%
-5%
-4.7%
-5.3%

-7.2%
-8.2% -8.0%
-10%

-15% -13.7%

Asia Pacific Africa Europe Middle East Latin America North America Industry
and Caribbean

Sources: IATA Sustainability and Economics, IATA Monthly Statistics

16 Global Outlook for Air Transport — A local sweet spot

3. Airline Financial Performance

Overview
Despite the rapid growth in passenger demand and the Industry wide, total airline revenue is forecast to recover to
absence of travel restrictions, the aviation industry is still around 107% of the pre-Covid level in 2023 (Chart 21). Air
grappling with the aftermath of the pandemic, during which passenger revenue will climb to around USD 642 billion and be
it recorded a historic loss of almost USD 140 billion. In the partly offset by somewhat lower air cargo revenue, following
face of many challenges, including wars, oil price volatility, the exceptional cargo revenues of the past couple of years.
elevated interest rates, and staff shortages, which all weigh Even so, at around USD 135 billion it will still be some 34%
on its financial performance, we nevertheless expect a return higher than its pre-Covid level.
to profitability in 2023. This is a remarkable feat, realized in an
equally remarkable short period of time.
Chart 21: Global airline revenue
Data published since our mid-year financial forecast show a
stronger than previously anticipated industry-wide financial US$bn
2024: 115%
performance. The better-than-expected results have been 1000 of 2019
2023: 107%
seen most notably in North America, Europe and Asia Pacific. of 2019
900 2022: 88%
At the industry level, we currently estimate the overall net of 2019
post-tax profit to reach USD 23.3 billion in 2023, with a slim 800
2021: 61%
operating profit margin of 4.5% (Chart 20). of 2019
700

Further recovery in international travel in Asia Pacific 600

underpins our expectations for 2024. At the global level, the
500
industry is expected to generate a net profit of USD 25.7 billion
next year, with a still modest 2.7% net profit margin. The key 400
financial figures can be found in Table 3 below.
300
Passenger + Other revenue
200

100
Cargo revenue
0
2015 2016 2017 2018 2019 2020 2021 2022 2023e 2024f

Sources: IATA Sustainability and Economics, The Airline Analyst

Chart 20: Global airline profitability

US$bn
60 EBIT margin Net post-tax profit 15%

40 10%

20 5%

0 0

-20 -5%

-40 -10%

-60 -15%

-80 -20%

-100 -25%

-120 -30%

-140 -35%

-160 -40%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024f

Sources: IIATA Sustainability and Economics, The Airline Analyst

17 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Table 3: Key air finance figures

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

Spend on air transport, USD billion 876 396 528 763 936 1 008

% change over year 3.6% -54.8% 33.2% 44.6% 22.6% 7.7%

% global GDP 1.0% 0.5% 0.5% 0.7% 0.9% 0.9%

Real return fare, USD/pax (2018USD) 315 216 231 284 288 283

compared to 2013 -36% -56% -53% -42% -42% -43%

Real freight rate, USD/kg 1.79 2.77 3.49 3.73 2.53 2.00

compared to 2013 -19% 25% 57% 68% 14% -10%

RPKs, billion 8,688 2,974 3,623 5,974 8,271 9,082

% change over year 4.1% -65.8% 21.8% 64.9% 38.4% 9.8%

CTKs, billion 254 229 272 250 241 252

% change over year -3.2% -9.9% 18.8% -8.1% -3.7% 4.5%

World GDP growth (real), % 2.5% -3.5% 6.3% 3.5% 3.0% 2.9%

World trade growth, % 0.3% -5.1% 9.8% 3.0% 0.8% 3.3%

Aircraft departures, million 38.9 16.9 20.1 27.8 36.8 40.1

% change over year 2.1% -56.5% 18.5% 38.4% 32.6% 9.0%

ASKs, % change over year 3.3% -56.6% 18.7% 40.2% 33.0% 8.9%

Passenger load factor, % ASK 82.6% 65.2% 66.9% 78.7% 82.0% 82.6%

Cargo load factor, % AFTK 46.8% 53.8% 56.1% 49.9% 43.2% 43.9%

Weight load factor, % ATK 70.4% 70.0% 59.5% 61.7% 66.9% 67.7%

Breakeven load factor, % ATK 66.4% 66.4% 76.7% 67.0% 65.8% 64.6%

Source: IATA Sustainability and Economics

The key assumptions underpinning our financial forecast include:

• A global GDP growth rate of 3.0% this year and 2.9% in • An average crude oil price of around USD 85 per barrel in
2024, broadly in line with the long-run average rate of 2023 and USD 85 - 90 per barrel in 2024. The jet fuel crack
growth. spread is expected to narrow but stay above its long-term
historical average.
• Inflation pressures easing gradually throughout 2023 and
2024, following a peak in 2022. Real interest rates, though • The passenger and fleet growth assumptions are
now positive, should remain relatively low in a long-term consistent with the information laid out in the sections
perspective after many years of negative real interest above, and highly dependent on the continued strong
rates. recovery in the China market.

• The USD is expected to hold its strength or strengthen • The outlook also depends critically on the evolution of
further versus most other currencies. the wars in the Middle East and Eastern Europe, which we
assume will not spread.
• Labor markets are tight and unemployment rates will
climb only slowly from the current low levels.
18 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Revenue development Capital providers

In dollar terms, passenger revenues are projected to reach Historically, the air transport industry has struggled to deliver
USD 642 billion in 2023, a remarkable increase of 47% from the returns which equity investors expect to receive for risking
2022, and exceeding 2019 levels by 7%. Reflecting capacity their capital. Put another way, the return on invested capital
constraints, including delays in aircraft deliveries worldwide, (ROIC) has typically been lower than the weighted average
the passenger load factor will likely increase to 82% this cost of capital (WACC) in the air transport industry. While this
year, bringing about elevated yields across most markets. holds true for the industry as a whole, it is not necessarily the
Passenger revenue growth is expected to slow markedly case in each region. In the four years prior to the pandemic, we
in 2024, to 12%, but from the much higher 2023 base. We estimate that equity investors in Europe and North America did
anticipate still strong passenger demand, half of which will receive returns above the cost of capital, helping the industry’s
come from Asia Pacific. With capacity continuing to return apparent move towards a more sustainable financial future.
in 2024, especially in Asia Pacific, growth in yields is set to
decelerate. The pandemic changed all of that, plunging the industry into
a record loss in 2020 and causing a significant deterioration
In 2023, cargo revenue is expected to decline by 35% YoY, across financial metrics including ROIC. Since that low
driven by both lower demand and falling freight rates. North point, we have seen a recovery in the industry’s financial
America and Europe are the regions particularly affected by performance as well as in traffic volumes. With ROIC turning
lower demand. Cargo capacity is returning as more passenger positive again in 2022 at just shy of the 2% mark, the metric is
aircraft re-enter service, while freight rates are impacted by expected to continue to increase in 2023 and 2024 reaching
competition from lower maritime cargo rates. We expect 4.7% and 4.9% respectively, again driven by the financial
cargo revenue to continue to decline, and the split between outcomes in North America and Europe in particular. At the
passenger and cargo revenue to revert to the pre-pandemic same time, however, the cost of capital has increased in
shares of 88% and 12% respectively. The forecast increases 2023 and is expected to remain elevated in 2024, as interest
in cargo demand (CTK) of 4.5% will be fully offset by a further rates around the world have risen in response to the sharp
erosion of freight rates. Freight rates are nevertheless most inflationary impulse. This has maintained a sizeable gap
likely to remain above the pre-pandemic levels. between ROIC and WACC. (Chart 22, Table 4).

Chart 22: Return on capital invested in airlines globally, 2008-2024f, % of invested capital

15% Cost of capital (WACC) Return on capital (ROIC)

10%

5%

0%

-5%

-10%

-15%

-20%

-25%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024f

Source: IATA Sustainability and Economics

Table 4: Summary of key financial metrics

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

ROIC, % invested capital (IC) 5.8% -19.3% -8.0% 2.0% 4.7% 4.9%

EBIT margin, % revenue (rev) 5.2% -28.8% -8.6% 1.6% 4.5% 5.1%

Net post-tax profits, USD billion 26.4 -137.7 -41.0 -3.8 23.3 25.7

% revenue 3.1% -35.8% -8.0% -0.5% 2.6% 2.7%

USD per passenger 5.80 -78.38 -17.91 -1.09 5.44 5.45

Source: IATA Sustainability and Economics

19 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Aircraft
Aircraft deliveries will increase in 2023 compared to 2022, The increase in demand for new airplanes is, unsurprisingly,
albeit remain below 2019 levels. The number of aircraft driven by the three largest regional markets: Asia Pacific,
scheduled for delivery in 2023 has been revised lower, Europe, and North America (Chart 23). The industry’s orders
reflecting the ongoing supply chain issues that have created are now more oriented towards narrowbody aircraft, a market
production delays. trend that has persisted through and since the pandemic. The
number of orders for regional aircraft and widebody jets has
However, seeking to acquire more fuel-efficient and quieter stagnated, while those for new generation narrowbody jets
equipment, airlines around the globe have continued to place has increased over the past years (Chart 24).
large orders for new commercial jets. The number of new
aircraft deliveries will reach 1,777 in 2024 and 2,075 in 2025
according to current schedules – a record in the history of
commercial aviation.

Chart 23: New aircraft deliveries by airline region of registration, 2018-2025 (scheduled and delivered)

Latin America North America Middle East Asia-Pacific Africa Europe Industry total
2075

1813 1777

589
349
1407 1372
542
112 1238 160
91 306 95
1040 99
456
85 386 117
435
806 544
102 274
55 94
315 81 470
231 49 111
47 84
314 354
31 276
794 200
551 647
518
270 335 350 357

32 48 27 22 22 30 31 40

2018 2019 2020 2021 2022 2023 2024 2025

Sources: IATA Sustainability and Economics, Cirium Fleet Analyzer

Chart 24: New aircraft deliveries by class, % share of total

Widebody Jets Regional Turboprops Regional Jets Narrowbody Jets

12.8% 13.5% 15.0% 14.3%

20.0% 22.0%
28.0% 3.8% 2.8% 3.8%
4.1%
9.3% 7.8% 7.3%
5.2% 2.5% 6.9%
7.8% 12.4%
6.4%
9.4%

74.0% 75.8% 74.1% 74.6%

67.0% 63.2%
56.2%

2018 2019 2020 2021 2022 2023 2024

Sources: IATA Sustainability and Economics, Cirium Fleet Analyzer

20 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Labor main driver of this trend is the war in the Middle East, which
poses a risk to the stability of oil production and exports, as
Global unemployment rates are generally at or around historically well as OPEC’s production curbs. We estimate the average
low levels. This is contributing to labor and skill shortages in many crude oil price in 2023 at USD 85 per barrel and see the crack
countries and across a broad spectrum of industries, including spread remaining high at USD 30.6 per barrel, reflecting the
aviation. The time taken to recruit, train, undertake the necessary limited refining capacity allocated to jet fuel. According to our
security checks and other requirements before staff are “job- estimates, the aviation industry will consume between 450k
ready” continues to present challenges for the industry in 2023. and 500k tonnes of sustainable aviation fuel (SAF) at USD 2500
per tonne (or 2.8x jet fuel), which will add USD 756 million to the
Staff shortages resulted in significant disruption during the industry fuel bill in 2023.
peak Northern Hemisphere summer period last year. While
the situation started to stabilize this year, with notably fewer In 2024, we forecast that crude oil prices will remain high
disruptions, tight labor markets and persistent inflation between USD 85-90 per barrel, depending on the evolution of
translate into upward pressure on wages. For air transport, we the geopolitical situation in the Middle East, and the production
expect that the labor and skill shortages observed in 2023 will decisions of OPEC. If it decides to increase its output targets
gradually dissipate next year. Nonetheless, wages will rise with to meet the growing demand, the price could drop. Clearly, a
the higher cost of living, and the industry will have to keep up sharper decline in global GDP growth could also push the price
with the employment needs dictated by the strength of the lower. In our central scenario, the crack spread should narrow
demand for air transportation (Table 5). to 30%, down from 36% in 2023, equivalent to USD 26 per
barrel (Table 6).

Fuel The aviation industry will increase its use of SAF and carbon
credits to reduce its carbon footprint. We estimate that
The outbreak of war in Europe in February 2022 caused a sharp SAF production could rise to 0.53% of airlines’ total fuel
increase in global oil prices. The price of jet fuel rose further consumption in 2024, adding USD 2.4 billion to next year’s fuel
still, exceeding USD 175 per barrel in the summer of 2022, bill. In addition, the carbon offsetting and reduction scheme for
causing the spread between jet fuel and crude oil prices (jet international aviation (CORSIA) is a global market-based carbon
crack spread) to climb above USD 60 per barrel. offsetting mechanism designed to stabilize international
aviation emissions. The CORSIA-related costs are estimated at
In 2023, crude oil prices again increased in the second half of USD 1 billion in 2024. These costs will add more pressure to the
the year but have so far remained below the levels of 2022. The already fragile profitability of the industry.

Table 5: Key industry labor metrics

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

Labour costs, USD billion 189 160 162 175 194 206

% change over year 3.5% -15.2% 0.8% 8.2% 11.3% 6.1%

Employment, million 2.93 2.56 2.61 2.75 2.94 3.05

% change over year 0.3% -12.6% 2.0% 5.0% 7.0% 4.0%

Productivity, ATK/employee 526,003 335,264 382,109 445,100 516,068 529,144

% change over year 2.5% -36.3% 14.0% 16.5% 15.9% 2.5%

Unit labour costs, USD/ATK 0.123 0.187 0.162 0.143 0.128 0.128

% change over year 0.6% 52.2% -13.3% -11.6% -10.3% -0.5%

Table 6: Fuel

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

Fuel spend, USD billion 190 80 105 215 271 281

% change over year 6.8% -58.0% 31.8% 104.2% 26.1% 3.8%

% opex 23.9% 16.1% 18.9% 29.7% 31.7% 30.8%

Fuel use, billion liters 359 196 236 292 357 377

% change over year 1.0% -45.3% 19.9% 23.8% 22.5% 5.4%

Fuel efficiency, fuel/100 ATK 22.1 21.7 22.4 22.6 22.3 22.1

% change over year -1.8% -1.8% 3.2% 1.2% -1.2% -1.2%

Fuel price, USD/barrel 79.7 46.6 77.8 135.6 115.5 113.8

% change over year -7.4% -41.5% 67.0% 74.3% -14.8% -1.5%

% spread over oil price 22.6% 11.6% 10.1% 35.0% 36.0% 30.0%

Source: IATA Sustainability and Economics

21 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Regions
The financial performance of all regions is expected to Latin America has seen a steady improvement in financial
improve in 2023 compared to 2022, and to exceed our mid- performance since 2020 but is expected to generate a loss
year expectations. However, the regions have recovered at of around USD 0.6 billion in 2023. The performance of airlines
different speeds, according to their response to the Covid across the region has been very mixed; some are performing
pandemic and its aftermath (Table 7). Based on the latest data strongly, while others find themselves in considerable financial
available, we estimate that three regions will generate a net difficulties including being in or coming out of chapter 11
profit in 2023, led by North America. proceedings. In part, this a consequence of the economic and
social turmoil observed in the region. The trend of financial
North America remains the standout region in terms of improvement is nevertheless clear, with the net profit margin
financial performance in air transportation. As the first market going from -11% in 2021 to an estimated -2% in 2023 and a
to return to profitability (in 2022), the North American carriers forecast -1% in 2024.
are expected to build on this performance in 2023, and
deliver a net profit of USD 14.3 billion, supported by a high The Middle East is expected to deliver a strong financial
passenger load factor and higher yields. Consumer spending performance in 2023, likely recording a net profit of around
has remained solid, despite cost-of-living pressures, and USD 2.6 billion, coupled with a 6% net profit margin.
the demand for air travel is robust. We expect air passenger The Middle East carriers have been swift to rebuild their
demand to exceed its pre-Covid level this year. In 2024 higher international networks and continue to operate important
passenger demand (RPK growth of 6%) and elevated load global hubs. The region’s financial recovery is supported by
factors remaining at 85% are expected to further strengthen still significant RPK growth that is likely to reach almost 35% in
revenue development and operating profitability. 2023. A net profit of around USD 3.1 billion at a 5% net profit
margin is expected in 2024.
Europe is likely to end 2023 with a stronger than expected
performance, notwithstanding the various capacity issues and Carriers based in Africa are expected to generate a loss
supply side constraints the region faces. European carriers of around USD 0.5 billion in 2023. Africa remains a difficult
will likely deliver a net profit of around USD 7.7 billion in 2023. market in which to operate an airline, with economic,
With strong demand for air travel set to continue in 2024, infrastructure, and connectivity challenges all impacting the
net profits should increase to around USD 7.9 billion, and a industry’s performance. Despite these challenges, there is
net profit margin of 3% in 2024. The key risks to the region’s robust demand for air travel. Underpinned by this demand, the
performance relate to the tight labor market, the war in Ukraine industry will continue to move towards profitability following
and in the Middle East, as well as ongoing concerns about the the Covid disruption, though we still foresee a modest loss in
economic outlook in some key countries inside and outside of 2024.
this region.

Asia Pacific shows remarkable revenue growth in 2023 and is

expected to be responsible for half of the world’s RPK growth
this year. This is very much thanks to the gains seen in the
domestic markets of China, India, and Australia, all recovering
at a faster rate than the rest of the world currently. However,
international travel in the region remains subdued, especially
in China, where it is still 40% below the pre-Covid levels. This
indicates that there is still a lot of pent-up demand for cross-
border travel in the region, which will likely boost the future
growth prospects regarding air transportation. Despite robust
revenue growth, the region is expected to see a loss in 2023
of USD 0.1 billion, and return to profitability in the second half
of 2024.
22 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Table 7: Regional financial performance

Worldwide airline industry 2019 2020 2021 2022 2023e 2024f

Africa
Net post-tax profit, USD billion -0.3 -1.8 -1.1 -0.8 -0.5 -0.4

Per passenger, USD -2.7 -58.0 -24.7 -10.2 -5.1 -4.5

% revenues -1.8% -29.9% -14.6% -7.1% -3.4% -2.7%

RPK growth, % 4.7% -68.2% 17.0% 84.8% 40.1% 7.3%

ASK growth, % 4.5% -62.1% 18.5% 51.5% 38.4% 9.4%

Load factor, % ATK 59.6% 51.4% 53.3% 62.2% 63.7% 63.0%

Breakeven load factor, % ATK 55.6% 60.1% 57.0% 64.2% 63.9% 62.9%

Asia / Pacific
Net post-tax profit, USD billion 4.9 -44.8 -13.7 -13.6 -0.1 1.1

Per passenger, USD 2.9 -59.3 -17.4 -13.9 -0.1 0.6

% revenues 1.9% -39.6% -10.4% -8.7% -0.1% 0.5%

RPK growth, % 4.7% -62.0% -12.8% 31.9% 98.1% 13.5%

ASK growth, % 4.4% -53.8% -6.1% 15.6% 77.9% 10.6%

Load factor, % ATK 72.3% 63.8% 63.3% 65.6% 66.9% 69.0%

Breakeven load factor, % ATK 69.6% 85.5% 70.9% 71.4% 67.1% 67.0%

Middle East
Net post-tax profit, USD billion -1.5 -9.6 -4.9 1.4 2.6 3.1

Per passenger, USD -6.8 -142.0 -59.8 7.1 11.2 13.3

% revenues -2.7% -35.1% -15.0% 2.6% 4.3% 4.8%

RPK growth, % 2.3% -72.1% 8.5% 144.6% 34.6% 6.3%

ASK growth, % -3.3% -61.7% 21.2% 67.2% 28.0% 10.7%

Load factor, % ATK 63.5% 54.7% 54.9% 62.9% 62.9% 63.4%

Breakeven load factor, % ATK 67.7% 68.3% 61.5% 59.7% 59.1% 59.6%

Latin America
Net post-tax profit, USD billion -0.7 -11.9 -7.0 -3.9 -0.6 -0.4

Per passenger, USD -2.2 -131.4 -52.6 -17.5 -2.5 -1.1

% revenues -1.8% -73.7% -31.9% -10.7% -1.5% -0.8%

RPK growth, % 4.2% -62.5% 40.5% 62.9% 16.3% 7.4%

ASK growth, % 2.9% -58.9% 37.3% 54.4% 14.4% 7.8%

Load factor, % ATK 69.2% 64.4% 66.6% 68.8% 68.3% 69.1%

Breakeven load factor, % ATK 65.3% 82.6% 72.6% 71.7% 68.4% 68.7%

North America
Net post-tax profit, USD billion 17.4 -35.1 -2.3 9.1 14.3 14.4

Per passenger, USD 17.0 -84.7 -3.2 8.9 12.5 13.5

% revenues 6.6% -25.2% -1.1% 3.0% 4.2% 4.0%

RPK growth, % 4.0% -65.1% 74.6% 45.6% 16.0% 6.3%

ASK growth, % 4.4% -51.0% 41.1% 28.7% 14.6% 6.0%

Load factor, % ATK 66.0% 52.1% 59.2% 64.0% 64.8% 65.2%

Breakeven load factor, % ATK 57.8% 66.3% 62.7% 60.1% 60.2% 60.8%

Europe
Net post-tax profit, USD billion 6.5 -34.5 -12.1 4.1 7.7 7.9

Per passenger, USD 5.42 -85.96 -22.8 4.18 6.86 6.39

% revenues 3.1% -41.7% -11.0% 2.3% 3.5% 3.3%

RPK growth, % 4.2% -69.5% 27.5% 101.7% 22.3% 10.5%

ASK growth, % 3.5% -62.3% 29.8% 69.9% 18.4% 8.8%

Load factor, % ATK 74.9% 65.2% 66.2% 73.6% 74.6% 76.1%

Breakeven load factor, % ATK 71.3% 82.8% 72.1% 70.6% 69.8% 71.5%

Source: IATA Sustainability and Economics

23 Global Outlook for Air Transport — Highly Resilient, Less Robust 3. Airline financial performance

Risks
Although the airline industry should see further growth in The airline industry is expected to experience slower growth
passenger demand in 2024, it will also have to deal with the in 2024 as global traffic should finally reach the pre-pandemic
uncertainties arising from economic and geopolitical factors. level, ending a high-growth recovery phase. Industry
With net profits of just USD 23 billion and a net margin of 2.6%, profitability will still be fragile, and airlines will have to navigate
resulting from revenues of USD 896 billion and USD 855 billion the uncertainties arising from economic and geopolitical
in expenses in 2023, the industry’s profitability is fragile and factors, supply chain issues, and regulatory costs to progress
could be affected (positively or negatively) by many factors: towards improved financial health. That financial health is
not only a question of profitability, but also of balance sheet
• Despite easing inflation, low unemployment rates, and strength. Although pandemic-era public support for airlines
consumers’ desire to travel in 2023, the risk of a sharper is being repaid (and has been already in a number of cases),
economic slowdown has not disappeared. Interest rates airlines are still left with more debt than prior to the crisis.
remain high in response to persistent inflation and tight This comes at a time when costs are rising and challenges
labor markets. Developments in China are a particular risk are mounting, none more impactful than that of the changing
to the global business cycle. Should unemployment rise climate.
significantly, the industry’s outlook could shift negatively.
Air transportation is an industry with remarkable resilience,
• As much as 20% of the European airspace is closed due able to bounce back swiftly from even a near total cessation
to the war in Ukraine. The main effect of this regrettable of activities. The world, the transportation sector, and the
situation has been seen on the routes flown, rather than aviation value chain, all have an interest in an air transportation
on global traffic numbers. Much of the affected traffic industry that is not only resilient but also robust and able to
has been rerouted via Turkey and the Middle East, for withstand various shocks without falling over in the first place.
example. A currently unanticipated peace could deliver This is so because our collective economic outcomes depend
the potential for cost improvements with lower oil prices on the free flow of goods and persons – a flow in which air
and efficiencies from the removal or easing of airspace transportation plays an indispensable and important role.
restrictions. The war in the Middle East has pushed oil
prices higher again, and OPEC countries’ output decisions
will also influence future prices. Clearly, any escalation
in these conflicts could produce a radically different
scenario for the world and for global aviation.

• Supply chain issues continue to impact global trade and

business. Airlines have been directly impacted by delays
in the delivery of aircraft parts and of aircraft, limiting
capacity expansion and fleet renewal.

• On the regulatory front, the industry could face rising

costs of compliance, and additional costs pertaining to
passenger rights regimes, regional environment initiatives,
and accessibility requirements.

Terms and Conditions for the use of this IATA Economics Report and its contents can be found
at: www.iata.org/economics-terms. By using this IATA Economics Report and its contents in
any manner, you agree that the IATA Economics Report Terms and Conditions apply to you
and agree to abide by them. If you do not accept these Terms and Conditions, do not use this
report.

www.iata.org/economics
International Air Transport Association
800 Place Victoria, PO Box 113
Montreal, Quebec, Canada H4Z 1M1
Tel +1 (514) 874 0202

iata.org