Despite challenges with aircraft supply and quality, the global aviation industry is set to grow in 2024, according to forecasts. A report on the aviation industry’s outlook for this year, published by PwC on Thursday, predicts that profitability in the sector will exceed forecasts by the International Air Transport Association (IATA) due to “strong demand and robust pricing power”.
The IATA has estimated that the world’s aviation industry will generate an operating profit of $49 billion (€45bn) this year, and a net profit of $23 billion (€21.1bn).
The PwC report predicts that passenger traffic will reach or surpass pre-pandemic 2019 levels in all regions this year, although air freight markets will remain “relatively weak”. It noted that strong demand for premium travel in 2023 boosted revenues and profitability for full-service airlines, while a 20 per cent average reduction in the average price of jet fuel also delivered a “material tailwind” to the industry last year.
Last year was also a “standout” one for aircraft lessors as they contributed an estimated $40 billion (€36.7bn) of delivery financing in 2023, with a further $6.5 billion (€6bn) in used aircraft sale and leaseback transactions.
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Dick Forsberg, senior aviation finance consultant with PwC Ireland and report author, said that the “remarkable performance” of the sector in 2023 was materially ahead of mid-year expectations, “largely due to the airlines’ ability to pass on cost increases to passengers”. He noted that fares in many markets last year were 20 to 30 per cent higher than pre-Covid.
The report highlighted challenges for the industry in 2024, including higher costs of labour and debt servicing, and aircraft quality and supply chain issues. The report estimated that the average wait time for western aircraft manufacturing now stands at 8.5 years, with a total of 14,500 aircraft in the production backlog. It added that “the ability to build aircraft that meet fundamental safety and quality requirements should be an absolute given but too often continues to fall short”.
On Wednesday the International Bureau for Aviation (IBA) also shared a positive outlook for the aviation industry in 2024, but highlighted aircraft supply issues.
The IBA predicted that revenue passenger kilometres (the number of paying passengers on an aircraft multiplied by the distance travelled) will grow by 9.7 per cent in 2024 compared to last year. It added that the net profit per passenger for the industry globally would grow from $6.40 (€5.87) in 2023 to $10.20 (€9.36) this year, as aircraft supply was constrained amid strong demand.
Regarding backlogs in aircraft supply, Dr Stuart Hatcher, chief economist with the IBA, said that with investment and training, and “all upstream supply chains get[ting] on board”, it was possible to meet targets. However, he said he would be “concerned” about the quality issue of aircraft. “Once we get the thing out of the door, what’s saying it’s not going to come back. That’s of course what we’re seeing at the moment with Boeing’s deliveries,” he said, adding that quality issues were “no good for confidence” in the sector.
Noting the sustainability challenge for the aviation sector in the years ahead, PwC Ireland’s aviation finance leader Brian Leonard said that as a global aviation hub Ireland had the opportunity to “take a leading role” in the sector’s journey to net zero by 2050. “Over 60 per cent of the world’s leased aircraft are managed from Ireland, and 14 of the world’s top 15 lessors are located here,” he said, adding that sustainability measures could include tax relief for investments into projects working on the development of new sustainable aviation fuel technologies.
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