Are Airlines profitable 2024?

It isn’t surprising that the US airline industry is one of the largest markets in the airline industry in the world. The country has about a third of all airports in the world- 15,000 airports of all sizes, out of which more than 5,000 have paved runways. Now if you are wondering about “Are airlines profitable?” then you are at the right place.

Are Airlines ProfitablE

In this article, we are not only going to discuss the profitability of airlines but also the most profitable airlines in the world and what techniques they implement for profit.


What Are The Types Of Airline Companies In The US?

The major airline companies can be classified into three categories: mainline passenger categories, freight carriers, and regional airlines.

The mainline passenger companies include carriers such as Alaska Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airlines, United Airlines, Virgin America, and American Airlines.

Whereas regional airlines include Envoy Air, ExpressJet and SkyWest Airlines. Moreover, the largest freight carriers in America include UPS Airlines and FedEx Express.


4 Techniques Of Profitable Airlines

4 Techniques Of Profitable Airlines

Here are a few techniques that can help airlines earn better profits:

1. Focus On Capital Base (Aircraft)

Most airlines focus on earning a profit, and the main thing they should focus on is the capital base. A narrow-body aircraft generates a higher capital turnover than a wide-body plane because of the cost and the usage.

Moreover, a narrow-body aircraft can be deployed on shorter flights; it can complete 5 or 6 flights a day compared with one to two trips for wide-body aircraft.

2. Airline Conduct Matters More than Market Structure

As new planes are rapidly being added in the airline industry, ticket prices are falling. The perfect example of this case is the Asian airline industry. The Asian market has been badly hit by the stiff competition.

On the other side, the US airlines flourished better because of more mergers leading to a more consolidated market. However, market structure isn’t the only factor. The Latin American market is an example of this case, as the industry also saw similar consolidated, but the airlines failed to return the cost of capital.

This shows that airline conduct is a more critical factor as compared to market conduct.

3. Ancillaries

There is a positive relationship between the ancillary and the ROIC. Before the pandemic, the airlines generated $110 billion in revenue from the sales of ancillary. Therefore, the profit margins from selling the ancillary is generally high, and without them, many airlines will fail to return their cost of capital.

In recent times, many high-performing airlines are actively innovating new ancillary and selling them at the right moment. These ancillary include aisle seats, premium meals, reserving overhead space, and private car transfers at the destination.

4. Create Privileges

When it comes to origin and destination (O&D), pairs and airlines enjoy the privilege to be able to provide passengers with unique services that other airlines don’t have. Successful airlines are able to identify, create, and monetize the niches in their flight network.

For example, Panama’s Copa Airlines serves more than 80 destinations across North and Latin America, offering thousands of O&D pairs.


Are Airlines Profitable?

COVID-19 largely affected every sector in every industry, and airlines were no exception. However, the good news is that the airline industry worldwide is recovering from the trauma that COVID-19 gave them.

The demand is again booming in North America, The Middle East, and Europe. The industry returned to profit with a $23.3 billion net profit on a 2.6% profit margin in 2023.

According to the International Air Transport Association (IATA), the profitability of the airline industry will stabilize in 2024. It is expected to reach $25.7 billion in 2024, marking a 2.7 profit margin.

Expenses are also set to grow by 6.9% over 2023, which is driven by jet fuel prices. Moreover, the number of travelers globally is set to increase at a historic level, with 4.7 million people expected to travel in 2024 compared to only 4.5 billion in 2019.

Willie Walsh, the IATA’s Director General, said in a press release that considering the major losses in recent years, $25.4 billion expected net profit in 2024 is a tribute to aviation resilience.

With these statistics, you can calculate how profitable the airline industry is and how much it is going to be in the near future.


How Airlines Make Money?

Airlines receive only 60% of the revenue from passengers directly, and the other 40% comes from frequently selling flyer miles to credit card companies and other traveling partners such as hotels and car rental agencies.

The revenue includes the cost of airfare, fees, and other travel expenses the airline charges. Talking about the 60% revenue from the passengers comes from 12% business class passengers. They tend to buy last-minute tickets, buy more expensive seats and are twice as profitable as any other passenger.

In fact, business passengers represent 75% of the airline’s revenue.


Net Profit Of Airlines Worldwide

Net ProFIT OF COMMERCIAL AIRLINES
YearIn Billion USD
20065
200714.7
2008-26.1
2009-4.6
201017.3
20118.3
20129.2
201310.7
201413.8
201536
201634.2
201737.6
201827.3
201926.4
2020-137.7
2021-42
2022-6.9
20234.7


Profitability Of Airlines By Region

As we know, the airline industry is projected to stabilize and grow in 2024, but not all the regions are expected to deliver the same amount of profit.

Here are the profits of a few carriers:

North America

Net Profit 2023$11.5 B
Net Profit 2022$9.1 B
Demand (RPK) vs 2022+16.5%
Demand (RPK) vs 2019+2%
Capacity (ASK) vs 2022+16.4%
Capacity (ASK) vs 2019+5%

European Carriers

Net Profit 2023$5.1 B
Net Profit 2022$4.1 B
Demand (RPK) vs 2022+19.6%
Demand (RPK) vs 2019-6%
Capacity (ASK) vs 2022+18.8%
Capacity (ASK) vs 2019-2%

Middle-East Carriers

Net Profit 2023$2.0 B
Net Profit 2022-$3.9 B
Demand (RPK) vs 2022+14.2%
Demand (RPK) vs 2019-2%
Capacity (ASK) vs 2022+13.5%
Capacity (ASK) vs 2019-1%

Asia-Pacific Carriers

Net Profit 2023-$6.9 B
Net Profit 2022-$13.5 B
Demand (RPK) vs 2022+63.0%
Demand (RPK) vs 2019-29%
Capacity (ASK) vs 2022+48.4%
Capacity (ASK) vs 2019-26%

Latin America Carriers

Net Profit 2023-$1.4B
Net Profit 2022-$3.9 B
Demand (RPK) vs 2022+14.2%
Demand (RPK) vs 2019-2%
Capacity (ASK) vs 2022+13.5%
Capacity (ASK) vs 2019-1%

African Carriers

Net Profit (F) 2023-$0.5 B
Net Profit 2022-$0.8 B
Demand (RPK) vs 2022+30.1%
Demand (RPK) vs 2019-11%
Capacity (ASK) vs 2022+22.7%
Capacity (ASK) vs 2019-17%


What Are The Reasons Airlines Are Always Struggling?

We have compiled a list of 4 reasons why airlines are always struggling:

1. High Fixed And Variable Cost

Aircraft are very expensive pieces of equipment, and regardless of the business conditions, the airlines have to pay either loan repayments or make large leases.

Moreover, the airline is also required to run complex operations, therefore increasing the payroll expenses. Another challenge that contributes to the high fixed and variable costs is the unpredictability of the oil prices. Let’s not forget the security costs that have skyrocketed after 9/11.

2. Unprofitable Airlines Continue To Fly

In business, when a company is unprofitable for decades, it is eventually forced to consolidate and rationalize in an attempt to find a better path for the business. However, this is not the case with the airline industry.

Despite substantial losses for the year, many airlines continue to operate the business like they were doing before. This is because the company’s stakeholders can’t afford to let them close.

Closing a large, unprofitable airline would mean inconvenience to many travelers, loss of thousands of jobs, and millions in losses to the airline’s creditors.

3. Exotic Events

Sometimes, exotic events such as terrorism, natural disasters, or political instability also contribute to affecting the airline industry for the worse.

For example, In April 2010, the airlines reported a loss of $2 billion from the closure of European airspace. This was caused by the massive ash clouds caused by the volcanic eruption in Iceland.

Another example is when the passenger demand plunged due to the attack of 9/11. The US airline industry suffered a loss of $7.7 billion in 2001.


Conclusion

So, overall, the answer to “Are Airlines Profitable 2024?” is quite simple yet unpredictable.

The airline industry is quite profitable, but its profitability is fragile and can be easily affected by factors such as wars, global economic developments, supply chains, and regulatory risks.

However, by applying the above-mentioned techniques, you can increase the profit of your airlines.


FAQs

What are the 5 most profitable airlines in the world?

The 5 most profitable airlines in the world include Qatar Airways, Ryanair Holdings Plc, International Airlines Group, Delta Airlines Inc., Singapore Airlines,

Which airline is the most profitable airline?

Delta Airlines Inc. ranks at the top by revenue, total assets, brand value, and market capitalization.

What is the profit margin of airlines industry?

On average, the profit margin is about 13.3% across routes. The profit margin in the airlines ranges between 2.7% and 42.9% acroos routes.

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