IATA: Airline industry profits expected to grow slightly in 2025

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The global airline industry is forecast to see a slight improvement in profits in 2025, despite facing a range of challenges including trade tensions, persistent supply chain disruptions and geopolitical uncertainties.

According to the latest financial outlook from the International Air Transport Association (IATA), the industry's net profits are expected to reach $36 billion in 2025, up from $32.4 billion last year, although this is slightly lower than IATA's own previous forecast of $36.6 billion.

Passenger revenue is forecast to rise to an all-time high of $693 billion, up 1.6% year-on-year, driven by strong passenger numbers and a record 84% seat load factor.

This growth is expected despite forecasts of a 4% decline in average passenger yields due to lower oil prices and increased competition among airlines.

Ancillary revenue is also expected to rise 6.7% to $144 billion, taking total industry revenue to a record $979 billion.

“Despite the headwinds, 2025 will be a stronger year for airlines,” said IATA Director General, Willie Walsh. “Net profit margins are expected to climb to 3.7%, up from 3.4% in 2024, a testament to the sector’s resilience amid economic and political headwinds,” he said.

The predicted improvement in profitability is largely due to a significant 13% drop in jet fuel prices compared to 2024, with an average price forecast at $86/barrel, according to IATA.

This equates to an estimated $236 billion in fuel costs, or about 26% of airlines’ total operating costs, down from $261 billion in 2024.

A reduction in fuel costs is crucial for the industry, Walsh said, as airlines’ thin net profit margins (equivalent to just $7.20 per passenger) make the sector vulnerable to sudden shocks in taxes, regulations or input costs.

However, the outlook for cargo is less rosy, with revenues forecast to fall 4.7% to $142 billion. This reflects a forecast slowdown in global GDP growth, from 3.3% in 2024 to 2.5% in 2025.

Trade tensions, particularly tariffs, are expected to curb air cargo demand growth to just 0.7%, a significant slowdown from the 11.3% growth achieved in 2024. Cargo yields are also forecast to decline by 5.2%. Supply chain disruptions are also expected to remain a major headwind.

According to IATA, the industry is facing a backlog of aircraft orders exceeding 17,000, with waiting times of up to 14 years.

Engine problems and spare parts shortages have led to record levels of aircraft under ten years old being grounded, contributing to reduced efficiency and higher leasing costs.

Walsh warned that the slowdown could last until the end of the decade.

“Manufacturers continue to disappoint, with no end in sight to these challenges,” he said.

However, regional profitability is expected to be positive across all markets.

Middle Eastern airlines are forecast to lead the way with a net profit margin of 8.7%, while African carriers are expected to lag behind at 1.3%.

Mr Walsh urged policymakers to tread carefully, noting that the aviation industry supports 86.5 million jobs and contributes 3.9% to global economic activity. Any additional costs or regulatory burdens could quickly erode the industry’s already fragile profit margins, he said.

Looking ahead, IATA noted that the industry is focused on balancing growth and sustainability.

Sustainable Aviation Fuel (SAF) production is expected to double to two million tonnes by 2025, however this still represents less than 1% of the industry’s total fuel consumption, highlighting the urgent need to ramp up production to meet net zero emissions targets by 2050.

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Source: Phaata.com (According to Freight News)

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