IATA: Key Risks for Air Transport Industry in 2024

Photo source: Pexels

Looking ahead to 2024, the International Air Transport Association (IATA) lists the key risks to the global economy and to air transportation and the potential impact of policy uncertainty in a historic election year in the midst of armed conflict and systemic challenges.

IATA is forecasting that an estimated 4.7 billion people will be flying in 2024 generating 25.7 billion dollars in revenues for airline companies. This comes on the back of a good year in 2023, when the global airline industry managed to restore traffic to pre-Covid 2019 levels and return to profitability after billions of dollars in losses.

According to IATA, the main challenges for the airline industry in 2024 are climate change, elections and geopolitics, US debt default, the impact of these events on the global business cycle and policy uncertainty.

The major risk facing the industry is climate change and the need for airlines to transition to the use of fossil fuels and to have access to these. IATA analysts note that operational disruptions from climate change can be expected when large hubs are affected by weather events. The costs of disrupted traffic as well as those concerning the energy transition are significant and will likely increase gradually as more sustainable aviation fuel (SAF) comes to market.

SAF. Photo source: United Airlines.

However, IATA sees an “upside to climate change” – the potential to develop new energy industries in many countries that will create jobs and boost GDP growth.

Another main issue in 2024 with a possible impact on air travel will be politics and the over 70 national elections due to take place in countries that are home to the majority of the world’s population. IATA analysts see a high risk of election surprises and the outcomes may impact an already fragile geopolitical environment.

Next on the list is the possibility of the US defaulting on its debt, which would likely provoke a major financial crisis with devastating consequences for the global business cycle. Additional threats to the global business cycle could be created by new health incidents like Covid-19.

Artificial intelligence (AI) is also seen as a potential risk to labor markets as certain categories of jobs are likely to be heavily impacted and transformed.

Currently, global debt has hit record highs. The IMF reports as of November 2023 that 10 countries in the world are in a state of debt distress, 26 countries facing moderate risk, and seven at low risk of debt distress, totaling 43 vulnerable countries. An associated impact on the airline industry is the amount of blocked funds that airlines are prevented from repatriating in hard currency from countries facing a shortfall of such reserves.

Lastly, IATA cites policy uncertainty. “We see a significantly more challenging environment in 2024 than in 2023 and believe that the balance of risks is negative. While we expect continued growth in air transportation and in the profitability of our industry, this growth will be at a much slower pace than in 2023,” it said.