Ms. Marie Owens Thomsen
SVP Sustainability and Chief Economist

Marie joined IATA in 2022 as Chief Economist. In January 2023 Marie added responsibility for IATA’s Environment and Sustainability activities to her role.

Marie joined IATA from Lombard Odier where she was Head of Global Trends and Sustainability. Her 30-year professional life includes roles for both investment banks and private banks, including HSBC in London, Merrill Lynch in Paris, and Indosuez in Geneva. Outside of the financial sector Marie worked for IKEA, and she also founded and managed her own company in the equine industry.

Marie holds an MBA from the University of Gothenburg in Sweden, and a PhD in International Economics from the Graduate Institute in Geneva, Switzerland. She speaks Swedish, English, and French fluently.

Airline profitability outlook strengthens despite challenging global economic environment

Airline Industry Outlook Improves for 2024

2024 is a historic year in terms of national elections around the world. More than 70 countries will go or have gone to the polls, involving 4.2 billion people, and hence a majority of the world’s population for the first time ever. Together, the countries concerned represent around 60% of global GDP and around 75% of passenger air traffic.

Labor Market Dynamics

The labor market is notably active, with global employment at record highs and unemployment rates at historic lows in many countries, showing no signs of reversing. This robust employment has shielded many economies from recession threats in 2023 and will continue to do so in 2024. The global economy’s steady 3% growth does not fully explain the widespread low unemployment, which typically increases with higher growth. Additionally, employment rises usually coincide with rising inflation, yet inflation is currently decelerating.

Airline Industry Financial Outlook

In this economic context, the International Air Transport Association (IATA) has revised its financial forecasts for the global airline industry upwards. In 2024, airlines are expected to achieve record revenues nearing $1 trillion, with expenses also at a record high of $936 billion. The net profit is anticipated to be $30.5 billion, representing a modest 3% net margin. Despite not being a record, this is a significant achievement considering the industry’s recent history.

Flying remains cost-effective, with 77% of 6,500 travellers in 15 markets recently poled by IATA agreeing. That’s not surprising considering that the real cost of air travel has fallen 34% over the last decade. Airlines’ projected net profit per passenger in 2024 is $6.14, roughly the price of a large coffee in Geneva. Profits vary significantly by region: Middle Eastern airlines lead with $15 per passenger, while African airlines earn just $1. North America sees $13 per passenger, Europe $7, and Latin America and Asia between $1 and $2.

Fuel Costs and Regional Variations

Fuel, specifically kerosene, is the largest expense for airlines, accounting for over 30% of total costs. Ideally, kerosene prices would be uniform globally, but they are not. Currently, prices are higher in Europe due to shipping industry issues caused by Panama Canal disruptions and the Middle East conflict. Supply, distribution, and taxes also affect prices.

Sustainable Aviation Fuel (SAF) and Decarbonisation

Sustainable Aviation Fuel (SAF), made from renewable, non-fossil materials, is significantly more expensive than fossil-based kerosene, costing two to five times more. This poses a challenge for airlines with slim margins, projected at 3% net in 2024. Rapidly increasing SAF production is crucial for both securing supply and reducing costs through economies of scale. Despite high demand, SAF’s anticipated 2024 supply will be around 0.5% of total aviation fuel.

Airlines lack the financial strength to tackle decarbonisation alone. SAF is expected to account for 65% of aviation’s decarbonisation by 2050. Achieving this energy transition necessitates a significant increase in SAF production to lower prices through scale effects.

The Role of Oil and Gas Sector in Renewable Energy

Replacing the majority of fossil fuel consumption with renewable energy is a monumental challenge requiring collective effort, including from the oil and gas sector, given their expertise and infrastructure. Unfortunately, oil industry profits remain predominantly in the fossil fuel sector, with oil and gas producers contributing only 1% to global clean energy investments.

Aviation’s Dual Challenge

The major risk facing the global economy and the airline industry is climate change, a systemic issue impacting all human activities for decades to come. The unprecedented challenge is reducing the global economy’s dependence on fossil fuels. While alternative energies exist, they are not yet available at the necessary scale. Air transportation, essential for its unmatched speed and reach, has no viable alternative. Therefore, ensuring access to SAF must be a global priority to achieve better economic and environmental outcomes.

Financial and environmental sustainability in air transport are intertwined, and achieving one without the other is not realistic. This represents aviation’s greatest challenge moving forward.