The International Air Transport Association (IATA) has upgraded its profitability projections for airlines in 2024, now expecting net profits to reach $30.5 billion, an increase from $27.4 billion in 2023. This surge in profitability is accompanied by record-high traveler numbers and revenues, with a new record number of passengers expected to fly in the U.S. this summer. The total global number of travelers for the full year is forecasted to reach approximately 5 billion, with revenues projected to soar to $996 billion, a 9.7% increase from 2023. The recovery in travel has been remarkable, with domestic travel bouncing back to pre-pandemic levels and international routes surpassing 2019 numbers. The IATA expects the number of world passengers to grow by an average of 3.8% per year over the next 20 years.
While leisure travel has been leading the recovery, business travel is steadily gaining momentum, though at a slower rate. A Morning Consult survey found that only 10% of U.S. adults had traveled domestically for work in March 2024, but the trend is heading in the right direction. The Global Business Travel Association predicts global business travel spending to surpass $1.5 trillion in 2024, up from $1.02 trillion in 2022. As for the hotel market, investors are optimistic but forecasts are being downgraded due to profitability still lagging pre-pandemic levels. STR and Tourism Economics revised down their 2024-2025 U.S. hotel forecast, reflecting lower-than-expected performance in early 2024 and reduced growth projections for the rest of the year.
Chinese outbound travel is making a comeback, with the World Travel & Tourism Council predicting that China’s travel and tourism sector will contribute a record-breaking 12.62 trillion yuan ($1.7 trillion) to the country’s economy by the end of this year. Domestic travel spending in China is also expected to reach new heights, providing a significant boost to the luxury market. Chinese shoppers, who were major luxury-goods spenders before the pandemic, are gradually returning, with domestic luxury spending up by 50%. This resurgence is encouraging for long-term luxury investments in mainland China and Europe.
The airline industry’s recovery is part of a broader positive trend in the services sector, with the S&P Global US Services PMI rising to a one-year high of 54.8 in May, reflecting strong consumer demand and business confidence. The airline industry presents a unique blend of recovery and growth opportunities, with strong profitability projections, an ongoing recovery in both leisure and business travel, and positive market dynamics. The rebound in Chinese travel and its impact on the luxury market further support the sector’s positive outlook for sustained growth. Overall, the industry is well-positioned for future success.
