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Airline profitability is expected to rise in 2025 even in the face of global economic and political shifts but the increase will be below forecast, according to the International Air Transport Association
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Total air cargo volume should reach 69 million tons this year, slightly higher than 2024, missing the forecast of 72.5 million tons
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Cargo revenues are expected to hit $142 billion this year, down 4.7% from 2024
Airline profitability is expected to rise in 2025 in the face of global economic and political shifts but the increase will be below forecast, according to the International Air Transport Association (IATA).
Total air cargo volumes should reach 69 million tons, 0.6% higher than 2024, missing the forecast of 72.5 million tons.
Cargo revenues are expected to hit $142 billion in 2025 (-4.7% on 2024). This is primarily based on the expected impact of reduced GDP growth largely influenced by trade-dampening protectionist measures, including tariffs, IATA said in a statement.
The cargo yield is also expected to reduce by 5.2%, reflecting a combination of slower demand growth and lower oil prices.
Although significant uncertainty remains on how trade tensions will evolve over the year, as of April cargo demand was holding up well with a 5.8% year-on-year increase.
“The first half of 2025 has brought significant uncertainties to global markets. Nonetheless, by many measures including net profits, it will still be a better year for airlines than 2024, although slightly below our previous projections,” IATA director general Willie Walsh said.
He added that the biggest positive driver is the price of jet fuel which has fallen 13% compared with 2024 and 1% below previous estimates.
“We anticipate airlines flying more people and more cargo in 2025 than they did in 2024, even if previous demand projections have been dented by trade tensions and falls in consumer confidence. The result is an improvement of net margins from 3.4% in 2024 to 3.7% in 2025,” said Walsh.
That’s still about half the average profitability across all industries. But considering the headwinds, it’s a strong result that demonstrates the resilience that airlines have worked hard to fortify, he further stated.
Overall, expected net profits for 2025 should improve to $36 billion, better than the $32.4 billion earned in 2024, but slightly down on the $36.6 billion projected at end-2024.
Operating profits should hit $66 billion, improved from an estimated $61.9 billion in 2024, but down from the previously projected $67.5 billion.
Total revenues should be at a record high of $979 billion, slightly better than 2024 but still below the $1 trillion previously projected.
Total traveler numbers, meanwhile, are seen to climb to 4.99 billion, which is 4% higher than 2024 but also below the previously projected 5.22 billion.
Said Walsh: “ Perspective is critical to put into context such large industry-wide aggregate figures. Earning a $36 billion profit is significant. But that equates to just $7.20 per passenger per segment. It’s still a thin buffer and any new tax, increase in airport or navigation charge, demand shock or costly regulation will quickly put the industry’s resilience to the test.”|
Policymakers who rely on airlines as the core of a value chain that employs 86.5 million people and supports 3.9% of global economic activity, must keep this clearly in focus, he added.
Gross Domestic Product (GDP) is the traditional driver of airline economics. However, although global GDP growth is expected to fall from 3.3% in 2024 to 2.5% in 2025, airline profitability is expected to improve. This is largely on the back of falling oil prices.
Meanwhile, continued strong employment and moderating inflation projections are expected to keep demand growing, though not as fast as previously projected.
Industry revenues are projected to reach a historic high of $979 billion in 2025 (+1.3% on 2024).
Passenger revenues are expected to reach $693 billion in 2025 (+1.6% on 2024), an all-time high.
Passenger growth is expected to be 5.8%—a significant normalization after the exceptional double-digit growth of the pandemic recovery.
It is expected that passenger yields will fall by 4.0% compared with 2024. This is largely reflective of the impact of lower oil prices and strong industry competition. This will continue the trend of travelers benefiting from ever-more affordable air travel. The real average return airfare (in 2024 US dollars) is expected to be $374 in 2025. This is 40% below 2014 levels.
This year, headwinds remain in various areas such that 85% of respondents surveyed by IATA expected trade tensions to impact the economy in which they reside and 73% expect to be personally impacted, 68% of business travelers (50% of those polled) expected increased business travel amid trade tensions to visit customers, and 65% said trade tensions would have no impact on their travel habits.
On the plus side, jet fuel is expected to average $86/barrel in 2025 (well below the $99 average in 2024), translating into a total fuel bill of $236 billion, accounting for 25.8% of all operating costs.
This is $25 billion lower than the $261 billion in 2024. Recent financial data show minimal fuel hedging activity over the past year, indicating that airlines will generally benefit from the reduced fuel cost. It is not expected that fuel will be impacted by trade tensions.
However, supply chain issues have had significant negative impacts on airlines: driving-up leasing costs, increasing the average fleet age to 15 years (from 13 in 2015), cutting the fleet replacement rate to half the 5-6% of 2020, and reducing the efficiency of fleet utilization.
This year, 1,692 aircraft are expected to be delivered. Although this would mark the highest level since 2018, it is almost 26% lower than year-ago estimates. Further downward revisions are likely, given that supply chain issues are expected to persist in 2025 and possibly to the end of the decade.
Engine problems and a shortage of spare parts exacerbate the situation and have caused record-high groundings of certain aircraft types.
“Manufacturers continue to let their airline customers down. Every airline is frustrated that these problems have persisted so long. And indications that it could take until the end of the decade to fix them are off-the-chart unacceptable,” said Walsh.
With ongoing geopolitical and economic uncertainties, the most significant risks to the industry outlook include:
- Conflict: The resolution of conflicts such as the Russia-Ukraine war would have a benefit for airlines in reconnecting de-linked economies and reopening airspace. Conversely, any expansion of military activity could have a dampening effect.
- Trade tensions: Tariffs and prolonged trade wars dampen demand for air cargo and potentially travel. Additionally, the uncertainty over how the Trump Administration’s trade policies will evolve could hold back critical business decisions that drive economic activity, and with it the demand for air cargo and business travel.
- Oil prices: Oil prices are a major driver of airline profitability. The complex array of factors impacting oil prices can produce quick shifts in pricing volatility with significant impact on airline financial prospects.
All factors considered, IATA stands by its projection for global airline profitability to strengthen slightly this year.
