IBA, the aviation market intelligence and advisory company, reports that the airline industry has recovered from the effects of the pandemic restrictions, with its outlook for 2024 showing all regions surpassing 2019 capacity levels, and revenues and yields stabilising in 2023 and early 2024.
According to IBA’s latest analysis, global passenger capacity in Available Seat Kilometres (ASKs) as of September 2024 has increased to 104% of pre-pandemic levels. The region most prominent in comparison to 2019 is Latin America, where airlines’ capacity is now at an average 119% of pre-pandemic levels.
This region was followed by Africa at 115%, North America and the Middle East at 108% and 104%, respectively, and Asia Pacific and Europe, which were both at 101%.
IBA also revealed that global airline revenue grew 23.1% on average in 2023 compared to 2022, while passenger numbers increased 28.3% and RPKs increased 33% on average over the same period. Data from the IBA Airlines reporting tool highlighted that 2023 marked a significant year of stability for the global airline industry, with the only notable gains being in the Asia-Pacific region. Airline revenue across that region surged by 48.7%.
This robust growth was largely driven by major Chinese airline carriers and the surrounding region. However, many of these carriers have also sacrificed yield, due to their volume approach. This is particularly prominent in Singapore and South Korea. IBA’s data indicates potential challenges ahead for some airlines, with growth continuing but at the expense of profitability.
In Europe, yield declines were also reported in Q2 2024 across major carriers, with Ryanair showing a revenue drop of around 1.8% despite a 22% increase in passengers.
Looking forward, many airlines are adjusting to higher debt levels, but must remain vigilant as low-cost debt matures and transitions to higher rates. Since 2019, the global average net debt has risen to 111.8%. North American carriers carry the heaviest debt burden, with average levels rising to 150.9% over the same period. In contrast, Middle Eastern airlines have reached the lowest net debt, dropping to 71.5% by 2023.
IBA’s standardised financial analysis highlights improved quick ratios for airlines, indicating enhanced immediate liquidity, even as asset turnover remains flat. This suggests that, despite record revenues, airlines are not extracting more return out of their assets.
Latin America and Europe led in asset turnover in Q2 2024, with both achieving a rate of 0.76. However, for Europe this is a slight decline from its 2023 turnover rate of 0.78 in 2024, whereas Latin America has remained the same.
Notably, quick ratios have risen globally in 2024 across all regions, with the Middle East experiencing the most significant increase, from 0.93 to 1.11, despite a decrease in asset turnover from 0.61 to 0.54.
IBA’s Operator Score Index, which considers financial and operational factors such as financial performance, fleet structure and operation, along with qualitative data, shows a forecast global weighted average score of 73% for 2024, consistent with 2023, and up from 70% in 2022, indicating a modest upward trend in overall airline operational performance.
However, a widening gap in operator scores between market leaders and higher-risk airlines is becoming evident, particularly among those facing rising engine maintenance costs. This is a challenge that is especially pronounced in regions such as Africa, where regulatory and financing hurdles remain significant.
As the aviation market continues to evolve, IBA notes that effective risk management during aircraft leasing has become increasingly critical for leasing companies. This involves closely monitoring utilisation data, fostering strong communication with airlines, and conducting regular inspections to pre-empt maintenance issues, ensuring both operational efficiency and safety.
For more information, visit www.iba.aero
