Travel Market Report – Q2 Update

TRAVELMARKETREPORTJune 2024Produced by Research & IntelligenceREPORT Mike EggletonDirector, Research & IntelligenceNatalia TretyakevichSenior Manager, Research & IntelligenceMelina SibajaTravel Insights AnalystThe Research & Intelligence teamTravel Market ReportWelcome to the latest edition of the Travel Market Report, brought to you by BCD Travel’s Research & Intelligence team. We start this quarter’s Travel Market Report with a roundup of the latest global airline industry outlook from the International Air Transport Association (IATA). This includes a summary of what to expect in six regions.American Airlines has recently adjusted its outlook for the second quarter of 2024. We explore how its financial performance over the last 12 months has compared to its rivals Delta Air Lines and United Airlines. Sticking with airlines, more appear to be striking bilateral partnerships, including new or expanded codeshare arrangements. Guided by recent examples, we try to understand what factors may be driving this. Turning to hotels, we use an index of average daily rates to understand how room rates are trending around the world.Finally, as part of our program of regularly surveying both travel managers/buyers and business travelers, we’ve taken the opportunity to get both groups’ views on travel policy. You can learn aboutsome of the key findings, before delving into the detailed reports, once they are both published. The International Air Transport Association (IATA) expects airline industry revenue to reach $996 billion in 2024, up almost 10%year-over-year (YoY) and reaching the highest nominal value in its history. The primary driver of growth will be an increase in traffic, with global airline passenger revenues forecasted to increase by more than 15% to $744 billion. Global air travel should finally fully recover in 2024, with passengers expected to number almost 5 billion. While up 10.4% YoY from 4.45 billion, the figure will also be 9% higher than in 2019. Traffic (revenue passenger kilometers -RPKs) should grow at a slightly higher pace of 11.6%, as people increasingly take longertrips. This will help support a 4.3% rise in average ticket prices (ATPs) globally, although this will be much lower than 2023’s 15% increase. Since its previous forecast (December 2023), IATA has raised by almost one-fifth both its global airline net profit estimate for2023 and its forecast for 2024. It’s also increased from 10.3% to 11.3% the pace at which it expects profits to grow in 2024. Global airline industry outlook+16%+16%+37%+13%+16%Source: IATA, June 2024Outlook for 2024 improvesAfrica –while demand for air travel exists, it’s being held back by high costs, while geopolitical issues will weigh on airline profits.Between 2020 and 2022, the world’s airlines had accumulated almost $182 billion in net losses; they’re scheduled to deliver total profits of $58 billion for the 2023-2024 period. It’s clear they still have a long way to go to fully offset the damage done by the pandemic to their bottom lines. But airlines in some regions are making better progress than others elsewhere. In 2024, airlines in Africa, Asia Pacific and Latin America may only have generated sufficient profits to offset 3-5%of total losses built up during the pandemic. European and Middle Eastern carriers are likely to have made much more progress, eating into 40-50% of their pandemic losses. But it’s North American airlines that are leading the financial recovery. This year, IATA expects them to have built up enough profits to more than cover total pandemic losses, putting them in a solid position going forward. Asia Pacific –2023’s slower than hoped for rebound means airlines may enjoy a bigger boost to growth in 2024 from the delayed release of pent-up demand for international travel.Europe–travel demand will remain strong, but supply chain issues and the risk of labor disputes remain challenges to European airline finances.North America –solid consumer spending and robust air travel demand are expected to continue underpinning airline finances. Labor shortages may impact smaller regional markets.Latin America –some airlines face considerable financial difficulty, reflecting the region’s economic and social turmoil. Markets in Central America will be key to driving growth. Middle East –significant traffic growth supported a strong financial performance among the region’s airlines in 2023. Gulf hub operations located in an economically buoyant region offer encouraging prospects for airlines in 2024. -160-110-60-104020192020202120222023e2024f5.4%3.9%41.4%3.5%53.9%102.4%0%20%40%60%80%100%120%AfricaAsiaPacificEuropeLatinAmericaMiddleEastNorthAmericaRegional prospects for 2024Airline profits as a percentage of pandemic-accumulated losses Global airline net incomeUS$ billion -25%-20%-15%-10%-5%0%5%10%15%20%AmericanDeltaUnitedQ2 23Q3 23Q4 23Q1 24Weaker-than-expected bookings prompted American Airlines to lower its operating margin expectation