Proactive Investors - Airline shares are flying higher today after the industry raised its profit outlook again as passenger numbers mushroom to record levels.
However, the International Air Transport Association (IATA) bemoaned that the rebound could be even bigger if it wasn't for disruption at Boeing (NYSE:BA) and other supply chain issues.
The air travel sector will make net profits of $30.5 billion at a 3.1% net profit margin in 2024, the IATA forecast today, up from an estimated $27.4 billion at 3.0% net margin last year.
An Asian travel recovery was the biggest element of an update from the previous 2024 forecast of $25.7 billion at 2.7% margin issued in December, with the profit forecast tripled since then to $2.2 billion, while the prediction for the North American market was unchanged.
Industry-wide revenues are expected to fly close to $1 trillion as passenger numbers are seen rising to a record 4.96 billion and air cargo volumes are expected to reach 62 million tonnes.
"In a world of many and growing uncertainties, airlines continue to shore-up their profitability," said Willie Walsh, the IATA’s director general and former boss of British Airways owner IAG.
He also told the media at the launch event that the market environment is "better than we had expected, particularly in Asia".
However, the IATA complained that the rebound in travel demand is being hampered by disruption to global supply chains, including deliveries of its aircraft fleets.
On the other side of that delivery coin, the capacity constraint means that passenger price yields are expected to strengthen 3.2%, though further easing of demand for cargo since the pandemic means cargo yields are expected to fall 17.5%.
Profit margins remain "wafer-thin," Walsh told Reuters, "well below where the industry needs to be".
In Europe, supply chain issues, high interest rates and the risk of labour disputes "could limit the prospects for further near-term increases in profitability", IATA said.
International Consolidated Airlines Group (LON:ICAG) shares were up 2.3% in late morning trading in London, easyJet (LON:EZJ) was up 3.1%, Wizz Air (LON:WIZZ) 3.45% higher, while in Europe Air France KLM was up 3% and Lufthansa 0.65%, while in America, premarket trading was modestly positive.