Tuesday, June 3, 2025
The International Air Transport Association (IATA) has updated its financial outlook for the global airline industry in 2025, projecting a modest increase in profitability despite ongoing geopolitical tensions, economic slowdowns, and supply chain disruptions. According to IATA’s latest data, airlines are expected to achieve net profits of $36 billion in 2025, an improvement from $32.4 billion earned in 2024, although slightly below earlier forecasts.
Willie Walsh, IATA’s Director General, stressed the resilience demonstrated by the industry in navigating headwinds such as falling consumer confidence and trade tensions. “Despite uncertainties, 2025 will be a better year for airlines than 2024,” Walsh said, attributing part of the positive outlook to a 13% reduction in jet fuel prices compared to the previous year.
Key Financial Highlights for 2025
IATA’s forecast reveals several important financial metrics for the industry:
- Net profit: $36 billion, up from $32.4 billion in 2024, but slightly below the $36.6 billion projected in late 2024.
- Net profit margin: 3.7%, improved from 3.4% in 2024.
- Return on invested capital: 6.7%, marginally higher than 6.6% in 2024.
- Operating profits: $66 billion, up from $61.9 billion in 2024 but short of the previously projected $67.5 billion.
- Total revenues: A record $979 billion, a 1.3% increase over 2024 but below the $1 trillion forecast.
- Total expenses: $913 billion, up 1.0% on 2024 but below earlier estimates.
Passenger numbers are expected to reach a record 4.99 billion, marking a 4% rise over 2024, while air cargo volumes will grow slightly to 69 million tonnes, though below earlier projections.
The Importance of Fuel Prices and Efficiency
One of the key drivers behind the improved outlook is the significant drop in jet fuel prices, forecasted to average $86 per barrel in 2025—down from $99 in 2024—translating into a $25 billion saving for airlines. Fuel costs, which represent approximately 26% of operating expenses, remain a critical factor in airline profitability.
Despite the encouraging fuel price trends, airlines face challenges in adopting Sustainable Aviation Fuel (SAF). Production is expected to double to two million tonnes in 2025 but will still account for less than 1% of total fuel use. SAF remains significantly more expensive than conventional jet fuel, with costs up to 4.2 times higher, largely due to compliance fees and supply constraints. This highlights the ongoing need for industry and government collaboration to scale up SAF production and reduce carbon emissions, as outlined in sustainability strategies promoted by aviation authorities like the U.S. Federal Aviation Administration (FAA) and the European Union Aviation Safety Agency (EASA).
Passenger Revenues and Market Dynamics
Passenger revenues are forecasted to reach $693 billion in 2025, the highest ever recorded, growing 1.6% year-on-year. Ancillary revenues—such as baggage fees and onboard services—are expected to rise by 6.7% to $144 billion. Passenger demand, measured in Revenue Passenger Kilometers (RPK), will grow by 5.8%, reflecting normalization after pandemic recovery surges.
Passenger yields are predicted to fall by 4%, a trend fueled by lower fuel costs and intensified competition, resulting in more affordable airfares. The average real airfare is expected to be $374 in 2025, 40% lower than in 2014, underscoring the long-term trend toward greater accessibility in air travel.
Cargo Segment Faces Headwinds
Air cargo revenues, by contrast, are expected to decline by 4.7% to $142 billion, with cargo volumes growing a modest 0.7%. This slowdown is linked to weakening global GDP growth and ongoing trade tensions, including tariffs that suppress demand. Despite these challenges, cargo demand has remained resilient, with a 5.8% year-on-year increase reported as of April 2025.
Supply Chain and Fleet Challenges
The airline industry continues to grapple with severe supply chain issues affecting aircraft deliveries, spare parts availability, and maintenance. The current backlog of undelivered aircraft has surged to over 17,000 units, implying a wait time of roughly 14 years. These disruptions have forced airlines to delay fleet renewal, increasing average fleet age to 15 years and constraining operational efficiency.
Engine reliability problems—particularly with Pratt & Whitney PW1000G engines—have resulted in record numbers of grounded aircraft, exacerbating capacity constraints. IATA anticipates 1,692 aircraft deliveries in 2025, marking the highest since 2018 but still nearly 26% below previous forecasts.
Regional Financial Performance
IATA’s report also highlights regional variations in profitability and growth:
- North America: Highest absolute profits with $12.7 billion projected in 2025 but faces pilot shortages and economic slowdown.
- Europe: Strong growth fueled by low-cost carriers and open skies agreements, with $11.3 billion net profit forecast.
- Asia Pacific: Largest market by traffic with $4.9 billion projected profit, benefiting from relaxed visa policies.
- Latin America: The only region expected to see a drop in profitability to $1.1 billion, affected by currency weaknesses and potential tax increases.
- Middle East: Highest profit margin at 8.7%, limited by aircraft delivery delays.
- Africa: Lowest profitability but sustained demand growth despite operational and currency challenges.
Traveler Sentiment and Industry Perception
According to a recent IATA poll of 6,500 travelers across 14 countries, air travel remains highly valued:
- 97% expressed satisfaction with their recent travel experience.
- 90% consider air travel a necessity of modern life and vital to the economy.
- 89% believe air travel positively impacts societies.
- 81% believe the industry is committed to achieving net zero carbon emissions by 2050.
Travelers’ confidence in aviation’s sustainability efforts exceeds their trust in government and oil sectors, highlighting the industry’s leadership role in climate action.
Risks and Outlook
Key risks to the airline industry’s 2025 outlook include:
- Geopolitical conflicts: Any escalation could disrupt airspace and trade flows.
- Trade tensions: Prolonged tariffs may suppress cargo demand and business travel.
- Regulatory fragmentation: Diverging global standards could increase operational complexity.
- Oil price volatility: Unexpected rises in oil prices would quickly erode profit margins.
Conclusion
While airlines face a complex environment of economic uncertainty, supply chain challenges, and geopolitical risks, the industry’s financial outlook for 2025 shows cautious optimism. Improved fuel costs, strong passenger demand, and ongoing efficiency gains support modest profit growth, reinforcing airlines’ resilience and critical role in the global economy.
