Airline Profitability Expected to Improve Modestly in 2025 Despite Challenges

Airline Profitability Expected to Improve Modestly in 2025 Despite Challenges

The International Air Transport Association (IATA) has released its updated financial outlook for the global airline industry in 2025, forecasting a modest improvement in profitability amid persistent economic and operational challenges. Net profits are projected to reach $36.0 billion, up from $32.4 billion in 2024, though this figure falls slightly short of the $36.6 billion forecasted in December 2024. The net profit margin is expected to increase to 3.7% from 3.4% last year, while return on invested capital is anticipated to rise to 6.7%.

Operating profits are forecasted at $66.0 billion, an increase from an estimated $61.9 billion in 2024, but below the earlier projection of $67.5 billion. Total industry revenues are expected to reach a record $979 billion, marking a 1.3% increase over 2024, yet still falling short of the previously anticipated $1 trillion. Expenses are also set to rise, reaching $913 billion, a 1.0% increase compared to the previous year.

Passenger traffic is forecast to climb to a record 4.99 billion in 2025, representing a 4% increase over 2024, while air cargo volumes are expected to grow modestly to 69 million tonnes, up 0.6%. Both figures, however, remain below earlier projections.

Ongoing Challenges and Regional Variations

Despite these gains, the airline industry continues to grapple with significant headwinds. Rising costs, ongoing supply chain disruptions, and weakening demand—exacerbated by global economic instability and political uncertainties—are dampening growth prospects. The first half of 2025 has been marked by heightened market volatility, influenced by factors such as U.S. government tariffs and trade tensions, which have negatively impacted consumer confidence and demand forecasts.

Regional performance is expected to vary considerably. North America is projected to generate the highest absolute profits, while the Asia-Pacific region is anticipated to experience the largest growth in demand. In contrast, many U.S. airlines have either lowered or withheld their annual forecasts in response to economic uncertainty. European carriers remain relatively optimistic, with Ryanair notably adjusting its strategy to focus on markets offering favorable incentives and established routes, while withdrawing from destinations facing new taxes.

A significant positive factor for the industry is the decline in jet fuel prices, which have fallen by 13% compared to 2024 and are now 1% below previous estimates. This reduction is helping to alleviate some of the cost pressures faced by airlines.

Willie Walsh, IATA’s Director General, commented on the outlook: “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. 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.”

While airline profitability remains below the average for all industries, the sector’s ability to improve margins and withstand ongoing challenges underscores the resilience and adaptability of airlines as they navigate a complex global environment.