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10 Feb 2025

Aviation Market Snapshot - Q4 2024

Our report examines the aviation sector, highlighting key insights, emerging trends, and significant developments. Growth in travel from emerging markets, especially China, has driven demand to an all-time high, reflecting a strong recovery and rising consumer affluence. However, it is important to recognize potential challenges ahead. We hope you find the insights in this report valuable for navigating this rapidly changing landscape.

Download the full Q4 Aviation market report PDF 5.1 MB

9.5%

year-in-year increase in International Revenue Passenger Kilometres (RPK)

Air passenger market analysis

Demand for air travel reached a new all-time high at the end of 2024 driven by a robust performance in the passenger market and an increase in international traffic. Notably, Northeast Asia was the leader in passenger traffic growth, largely due to the recovery of international travel from China and a rise in domestic tourism there.

The more established Western European and North American markets also recorded resilient demand, contributing solidly to industry-wide growth. Emerging aviation markets outpaced the industry average, particularly in Northern Africa, Eastern and Central Europe, and Central Asia. The Southwest Pacific region also exceeded global averages, reflecting a revival in travel in the broader Asia Pacific area.

Conversely, despite establishing itself as a vital hub in global air traffic, the Middle East only posted modest growth in international passenger numbers. This can be attributed to a decline in traffic to Israel and its neighbouring countries.

Overall, despite some near-term geopolitical uncertainties, continued demand means the air travel sector is poised for continued growth.

Derek Wong, Aviation Debt Funds

Although there is positive momentum as we begin 2025, we are watching for potential headwinds. In the latter half of 2024, the US dollar (USD) strengthened against core emerging market currencies in Brazil, Mexico and India, which further increased costs for local airlines. Air freight carriers will have to adjust to near-shoring trends and uncertainties President Donald Trump’s term. In 2025, we will remain disciplined in structuring transactions while taking advantage of the stronger aviation market.

Airline financial performance

The financial performance of airlines in 2024 has been positively influenced by an upward revision of profitability for 2023, which emerged as an exceptionally strong year—ranking as the fourth best in the last 30 years. Notably, 2023 marked the first year post-pandemic when capacity utilisation and load factors were restored to pre-pandemic levels, resulting in a reduction in unit costs. The estimated operating margin for 2024 stands at 6.4%, which is 3 percentage points above the 20-year median.

However, it is important to note that costs have risen across all non-fuel areas. Following the remarkable recovery in profits during 2023, airlines faced pressure from staff for salary increases, which was compounded by ongoing labour shortages. Additionally, supply chain issues impacted other costs which limited capacity expansion. Maintenance costs, in particular, escalated due to engine-related aircraft groundings and an ageing global fleet. In 2024, the average age of the global commercial aircraft fleet reached 14.8 years, the highest on record. An older fleet means higher maintenance costs, higher fuel consumption, and additional capital expenditure for unplanned retrofits of aircraft that were initially scheduled for retirement.

With replacements currently unavailable, airlines are extending the operational lifetimes of existing aircraft. Furthermore, we have observed a significant rise in aircraft ownership costs, which can be attributed to the delayed effects of previous interest rate increases and a sharp rebound in leasing costs amid delays in new fleet deliveries.

In summary, while the airline industry is benefitting from improved financial performance, rising costs in various areas pose challenges that need to be managed carefully.

Download the full Q4 Aviation market report PDF 5.1 MB

Investec Aviation Finance

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7 years

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Aviation finance from Investec

Investec co-invests in all managed platforms, with strong technical capabilities and a proven track record in originating, releasing and remarketing aircraft.

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