Are Airlines good investment choice in 2024?

JacksNiffler
2023-12-26

Although many air travelers may not have noticed, airfare prices have become cheaper in 2023, with the average round-trip ticket price expected to be $254, lower than the $315 in 2019.

However, the three major US airlines - $Delta Air Lines(DAL)$ $United Continental(UAL)$ $American Airlines(AAL)$ - have had decent stock returns this year, with a 10-25% return despite not outperforming the market, amidst significant oil price fluctuations.

Despite the recovery underway, a net profit margin of 2.7% is far lower than what most other industry investors would find acceptable. This means that for every passenger transported, airlines are only left with $5.45, roughly enough to buy a "grande latte" at a London Starbucks.

According to the International Air Transport Association (IATA), the outlook for 2024 is very optimistic:

The airline industry's net profit is expected to reach $25.7 billion in 2024 (with a net profit margin of 2.7%), slightly higher than the $23.3 billion net profit in 2023 (with a net profit margin of 2.6%).

In 2023 and 2024, the return on investment is expected to lag behind the cost of capital by 4 percentage points, due to global interest rate increases in response to sharp inflationary pressures.

It is projected that the airline industry's operating profit in 2024 will increase from $40.7 billion in 2023 to $49.3 billion.

Total revenue in 2024 is expected to increase by 7.6% compared to the previous year, reaching a record high of $964 billion.

Projected expenditure growth rate will be slightly lower than 7.6%, reaching a total of $914 billion.

It is estimated that there will be a record high of 4.7 billion travelers in 2024, exceeding the pre-pandemic level of 4.5 billion in 2019.

Projected freight volumes for 2023 and 2024 are 58 million tons and 61 million tons, respectively.

2024 Outlook: How Will Story Unfold?
With the end of the year approaching, major institutions begin to provide outlook for US stock market in 2024. How do institutions expect for 2024? Will the bull market continue? How about expectations for inflations and rate hike? What's your attitude: Cautious or Bold?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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