Global air transport outlook and imperatives for Africa

The International Air Transport Association (IATA), the international association representing around 320 airlines accounting for 83 percent of global air traffic, in December 2024 released its semi-annual report on global outlook for air transport. The report takes a broad look at developments in the airline industry, the context in which it is operating, and the challenges it is facing.

The report pointed out the falling price of Brent crude oil by around 20 percent over the past 12 months being the result of oversupply as the United States affirms its position as the leading oil producer in the world as well as the shifting demand for different energy products, with emphasis on China.

A Trump administration in 2025 is likely to continue above trend in taking the lead in oil supply by the United States. With some banks recently suspending their net-zero banking alliance, the stage seems set for increased investment in fossil fuels. This increase in supply and reduced fuel costs (fuel is said to account for about 30 percent of airline costs) will present an opportunity for low-cost carriers to deepen the demand for air transport in Africa, especially intra continent. Airlines, IATA points out, will benefit from lower crude oil prices as long as jet fuel prices decline in parallel.

Other opportunities presented by lower oil prices, are that it will have several implications for the global economy and the airline industry, the most obvious one being lower headline inflation. Africa continues to contend with a cost-of-living crisis and such a relief provided by lower oil prices will require improving the passenger experience as well as integrating other means of transport to complement air transport so that lower travel costs benefit the air transport sector. With increased refining capacity in Africa going forward, fuel supply to airports from refineries may become cheaper through pipelines than using some other means now in place.

Another unique opportunity presented by lower oil prices is to reform fossil fuel subsidies and redirect them towards renewable energy production. It points out that a year’s worth of global fossil fuel subsidies, $7 trillion in 2022, would cover the entire capital investment needed for the airlines’ energy transition over the 27 years to 2050. The journey towards net zero will not only be for the airlines, but will also be for all in the aviation sector to see this opportunity as an added motivation to collaborate towards the desired decarbonization goal.

Passenger traffic, it points out, has remained strong in 2024. For 2025 IATA expects traffic to continue to grow, albeit at a somewhat slower pace, as all regions surpass pre-pandemic levels. Africa is estimated to have generated a modest yet encouraging net profit of approximately $0.1 billion in 2024. Looking at the terrain, the Africa region faces inherently high operational costs and a low propensity for air travel expenditure. A significant issue, it points out, is a shortage of US dollars in some economies which, along with infrastructure and connectivity challenges hinder the airline industry’s expansion and performance. Africa still, in spite of these obstacles, has a sustained demand for air travel, which is expected to help improve the region’s profitability marginally from 0.8 percent in 2024 to 0.9 percent in 2025.

The cargo market has played a key role in giving support to airline traffic in 2024. Demand surge came because of effervescent cross-border e-commerce and capacity limitations in ocean shipping. Looking ahead to 2025, the outlook remains strong, given the ongoing challenges in maritime shipping. Global yields for air cargo stopped declining in 2023 and are now around 30 percent above pre-pandemic levels. IATA expects cargo yields to remain stable in 2025.

Capacity constraints by airlines also came into focus. Looking ahead to 2025, the delivery forecast is optimistic, at 1,802 aircraft deliveries that would mark a new record high in aviation history. This estimate has also been revised down due to ongoing production problems (the peak estimate for 2025 is 2,293 aircraft). IATA sees  further downward revisions as quite possible given that supply chain issues are expected to persist in 2025 and beyond.

Due to long waiting times, several airlines have stopped ordering new aircraft and are prioritising the acquisition of any available aircraft to meet growing demand. It also points out that some parked aircraft might never return to service, especially regional jets, due to a pilot shortage. Also, the average age of some popular narrowbodies and widebodies being parked exceeds 25 years, making their return to service less likely.

Labour also came into focus. Increasing number of employee strikes at airlines and airplane manufacturers caused numerous disruptions in the industry in 2024, the report points out. The industry still grapples with a labour shortage, especially among pilots, mechanics, and aircraft maintenance workers. The workforce, it states, has been ageing substantially, and there is a lack of younger workers to replace those who are retiring.

Africa has a young and educated population and is well positioned to make the most of this global skill shortage by directing its training and manpower development towards science, technology, engineering (especially of artisans and tradesmen) and mathematics. In doing so, aviation can increase its contribution to GDP in the continent as well as reduce costs of maintenance and repairs of aircraft carried out abroad.

In 2025, IATA expects airlines’ revenues to surpass the evocative $1 trillion mark. The top-line growth and lower fuel prices should translate into higher profitability. In its forecast, it expects a net profit of $36.6 billion — a record high for the industry — at a still meager 3.6 percent net profit margin. Load factors are likely to remain high as supply chain issues will continue to impact 2025 and beyond.