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Challenges old and new never stop bedeviling the airline industry and rocking best-laid plans.
As it enters 2025, the global air transport industry carries over problems from the year before—a chronic supply chain crisis, higher labor costs, political shifts that may or may not change economies and demand for air travel, and the vexing challenge of how to both meet and afford aviation sustainability goals.
But underlying these obstacles is a calm confidence. The pandemic, awful as it was, highlighted how much people and businesses need or want to travel by air. Many airlines came out of it better organized, more efficient and more disciplined. Emerging economies show how much potential there is for vast new air travel markets to develop and grow, especially in India and South America.
The world’s airlines are expected to post a collective net profit of $31.5 billion for 2024 and $36.6 billion for 2025, representing a remarkable turnaround from the historic money-losing pandemic years, although margins will remain in the low single digits.
In its newest financial outlook, posted in December, IATA provided a summary of financial, traffic and trends forecasts for the global airline industry for the end of 2024 and into 2025.
Key data beyond the net profits for each year include total airline revenues for 2025, which are expected to hit $1.007 trillion. That will be 4.4% above anticipated 2024 revenues and the first time that the airline industry, as a collective, will have topped the $1 trillion mark.
However, net profit margins will be fragile: 3.3% in 2024 and 3.6% in 2025, IATA said, representing just $7 per passenger. Return on invested capital across airlines is expected to be 6.6% in 2024 and 6.8% in 2025. Passenger numbers are expected to reach 5.2 billion in 2025, a 6.7% increase over 2024 and will mark the first time that it exceeds 5 billion. While that is good news, it will still be far below what air traffic numbers were forecast to be before the pandemic.
Air cargo volumes, meanwhile, are expected to reach 72.5 million tonnes, a 5.8% increase over 2024. Cargo revenues are expected to reach $157 billion—15.6% of total revenues—in 2025.
Airline costs are expected to grow by 4% to $940 billion in 2025, with labor accounting for much of that, including “intense salary pressure” and one-off expenses related to several employee strikes in 2024. IATA said there has also been a sharp increase in maintenance costs because of aircraft groundings and an aging fleet related to the on-going industry supply chain issues that have severely restricted the delivery of spare parts and new aircraft.
Lower jet fuel prices and efficiency gains are the main drivers of the financial improvements, with oil about $20 per barrel cheaper than it was this time in 2023. More importantly for airlines, the so-called “crack spread”—the difference in price between crude oil and jet fuel—has closed to more normal levels of about $15 to $20 per barrel versus the all-time highs of around $60 in 2022, IATA SVP sustainability and chief economist Marie Owens Thomsen said.
While expectations are for lower oil prices to be maintained through 2025, this will depend on circumstances well outside the control of airlines or the aviation industry. An escalation of current wars or the start of new conflicts, for example, could prompt higher oil prices and lower consumer and business confidence in air travel. Nevertheless, with labor and aircraft maintenance costs rising, airlines will be more dependent than ever on lower oil costs to achieve profitability.
REGIONAL DIFFERENCES
As is typical, there will be wide differences in airline profitability region by region, although all geographic regions are expected to show financial performance improvements in 2025 versus 2024.
North American airlines are expected to generate the largest absolute profit in both 2024 ($11.8 billion) and in 2025 ($13.8 billion).
European airlines will be the next most profitable at $10 billion in 2024 and $11.9 billion in 2025.
There is then a big drop in net profit in other regions, with Middle East airlines placing third ($5.3 billion in 2024 and $5.9 billion in 2025); Asia-Pacific airlines fourth ($3.2 billion in 2024; $3.6 billion in 2025); Latin American airlines fifth ($1 billion; $1.3 billion); and African airlines sixth ($0.1 billion; $0.2 billion).
However, the rankings are somewhat reversed when net profits per passenger are considered. Middle East airlines lead that ranking, at $23.9 per passenger expected in 2025, when North American carriers are forecast to make just $11.8 per passenger.
ASIA AND CHINA
All eyes will be on Asia-Pacific and China airlines, which have lagged carriers in other regions in the speed of their pandemic recovery.
Lessor Avolon, in its outlook paper published in January, predicted that Asia-Pacific will make up more than half the increase in global seat capacity in 2025. The lessor also predicted that, after 182 deliveries to China in 2024, aircraft deliveries would substantially increase in 2025.
The Association of Asia-Pacific Airlines (AAPA) tracked traffic across the region to be at 96% of 2019 levels by September, but director general Subhas Menon warned that the rapid growth and recovery of the earlier months of 2024 could not be taken for granted because supply chain issues had slowed progress.
As a leader in the field despite having no domestic traffic, Singapore Airlines (SIA) still saw profits under pressure by mid-year, reporting a drop in yields that it attributed to an injection of capacity from competitors and the company’s first-half operating profit slid 48.8% year over year.
Other Asian carriers—LCCs and full-service carriers—displayed similar trends as they worked to restore capacity and rebuild networks.
Menon said the task ahead would be to keep an eye on operational costs but warned about oil prices if the Middle East geopolitical situation worsened.
China has fully reopened its borders and domestic traffic figures are above 2019 levels by double digits, but international travel recovery is slower, he said.
RISKS
IATA noted some “significant risks” to its industry outlook, including possible worsening conflict prospects should the wars in Europe and the Middle East spread and the incoming Trump administration in the US that could bring uncertainties, such as potential tariffs and trade wars that would likely dampen demand for air cargo and impact business travel.
However, IATA director general Willie Walsh said he believed on balance, and based on Trump’s previous administration, that the new Trump administration would bring an overall net benefit to the industry.
“I’ve met Trump twice, and he hasn’t told me what he will do, but my expectation is that it will be 2026 before we see any impact [of Trump administration policies] and I don’t see it as a black-and-white issue; it’s more gray,” Walsh said.
Walsh also warned IATA plans to look at whether there was evidence of anti-competitive behavior among aircraft manufacturers and the aerospace supply chain, as airlines continue to deal with significant delivery delays and a shortage of spare parts. “I prefer if we didn’t have to go down that road, but we have been patient for too long,” Walsh said. “IATA can play a significant role in this … Key suppliers appear to be immune from normal competitive dynamics. We are dealing with quasi-monopoly suppliers. There could well be evidence that this is a case of these suppliers being able to abuse their dominant position. They are benefitting from the supply chain issues. There is no evidence that they are resolving this.”
This may be a little saber-rattling to get the attention of suppliers, but there is precedent. In 2016, IATA joined a legal case against CFM International on information sharing with third-party MRO providers that had been pursued by some of its members with the European Commission. The issue was settled in 2018.
At the AAPA annual assembly in Brunei, ahead of the IATA forecast briefing, Asian airline members issued a call for action by industry organizations to take a harder stance against manufacturers and service providers that were not delivering to contract.
“We are sandwiched in the middle of two parts: the customer on one side and regulators and consumer protection on the other. Yet the root cause for these delays and disruptions stems from the supply chain,” Thai Airways CEO Chai Eamsiri said. “We haven’t heard from the OEMs on timelines and their improvement steps. We need to work together as an industry.”
Avolon forecasts a 20% increase in aircraft deliveries in 2025, with over 1,400 scheduled, the fastest ramp-up in two decades. Its January outlook report said that despite the increase in planned deliveries, whether to expand fleets or just replace ageing aircraft would remain a challenge for airlines in 2025, with slots for new aircraft sold out beyond 2030.
“Despite increasing deliveries, Airbus and Boeing will continue to struggle to hit their targets to ramp-up production,” Avolon said, adding, “The structural under-supply of new aircraft is driving aviation industry market dynamics.”
Beyond the extra costs and inability to fulfill growth plans, the shortage of aircraft is leading to an ageing in-service fleet that is not as fuel-efficient as the new-generation aircraft airlines had planned.
According to IATA, the average aircraft age in 1990 was just over 12 years and has averaged 13.6 years since then. In 2024, it further aged to 14.8 years.
Talking exclusively to ATW, IATA SVP operations, safety and security Nick Careen said OEMs were not properly forecasting.
“You’re seeing examples where airlines are actually taking some of their old aircraft out of the desert and refitting them because they know that they’re just not going to have the airplanes that they had planned in the future, and that comes at a huge cost,” Careen said.
“It’s something that we don’t take lightly, and it’s something that we continue to work with industry, whether that’s the aircraft manufacturers, but more importantly now it’s the avionics manufacturers as well as the engine manufacturers, because it’s a call shared by all of us at the moment. Transparency is the name of the game, and we need to see greater transparency.”
Overall, however, Careen is optimistic for 2025.
“I think the digital transformation that the whole planet is undergoing, never mind just our industry, is very exciting because the impact of that is going to change, have an exponential change on how we do things.
“It’s going to actually happen faster than we have seen over the last perhaps 25, 30 years. So that is very exciting, looking forward. And the fact that we’re back to profitability obviously allows for investment, the necessary investment that is elusive,” he said.
—Chen Chuanren and Helen Massy-Beresford contributed to this report.
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