Are Airlines good investment choice in 2024?
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.
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