Airline Profitability to Strengthen Slightly in 2025 Despite Headwinds

Upward Trend: Airline Profitability in 2025

The International Air Transport Association (IATA) has updated its 2025 airline industry financial outlook, indicating improved profitability for 2024 and demonstrating resilience amid global economic and political changes.

Highlights from the expected 2025 financial performance include:

• Net profits at $36.0 billion improved from the $32.4 billion earned in 2024, but were slightly down on the previously projected $36.6 billion (December 2024).
• The net profit margin, at 3.7%, improved from the 3.4% earned in 2024 and the previously projected 3.6%.
• Return on invested capital at 6.7%, improved from the 6.6% earned in 2024 and largely unchanged from previous projections.
• Operating profits at $66.0 billion, improved from an estimated $61.9 billion in 2024, but down from the previously projected $67.5 billion.
• Total revenues are at a record high of $979 billion (+1.3% on 2024, but below the $1 trillion previously projected).
• Total expenses are at $913 billion (+1.0% on 2024, but below the previously projected $940 billion).
• Total traveller numbers reached a record high of 4.99 billion (+4% on 2024, but below the previously projected 5.22 billion).
• Total air cargo volumes reached 69 million tonnes (+0.6% on 2024, but below the previously projected 72.5 million tonnes).

“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. The biggest positive driver is the price of jet fuel which has fallen 13% compared with 2024 and 1% below previous estimates. Moreover, 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. 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,” said Willie Walsh, IATA’s Director General.

Perspective

“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,” said Walsh.

Outlook Drivers

Gross Domestic Product (GDP) is a key factor in airline economics. Although global GDP growth is projected to decline from 3.3% in 2024 to 2.5% in 2025, airline profitability is expected to improve. This improvement is mainly attributed to decreasing oil prices. Additionally, strong employment levels and moderating inflation forecasts are anticipated to sustain demand, even if the growth rate is lower than previously expected.

Efficiency is another significant driver of the outlook. Passenger load factors are expected to reach an all-time high in 2025 with a full-year average of 84.0%, as fleet expansion and modernisation remain challenging amid supply chain failures in the aerospace sector.

Overall, total revenues are expected to grow by 1.3%, outpacing a 1.0% increase in total expenses, shoring up industry profitability.

Revenue

Industry revenues are expected to reach a historic high of $979 billion in 2025 (+1.3% on 2024).

Passenger Revenues

Passenger revenues are expected to reach an all-time high of $693 billion in 2025 (+1.6% on 2024), bolstered by an additional $144 billion in ancillary revenues (+6.7% on 2024).

Passenger growth (measured in Revenue Passenger Kilometers/RPK) is expected to be 5.8%—a significant normalization after the exceptional double-digit growth of the pandemic recovery.

Passenger yields are expected to 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, 40% below 2014 levels.

IATA’s April 2025 polling data supports projections for demand growth:

• Some 40% of respondents expect to travel more over the next 12 months than they did in the previous 12-month period. The majority (53%) said they expected to travel as much as they did in the last 12 months. Only 6% reported that they expect to travel less.
• Some 47% of respondents expect to spend more on travel over the next 12 months than they did in the previous 12 months. An almost equal proportion (45%) expect to spend the same on travel over the next 12 months, while only 8% expect to spend less.
• Although 85% expected trade tensions to impact the economy in which they reside and 73% expect to be personally affected, 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.

Cargo Revenues

Cargo revenues are projected to reach $142 billion in 2025, representing a decline of 4.7% compared to 2024. This forecast is primarily influenced by anticipated reductions in GDP growth, largely due to trade-restricting protectionist measures such as tariffs. Consequently, air cargo growth is expected to slow to 0.7% in 2025, a significant decrease from 11.3% in 2024. Additionally, cargo yields are anticipated to decline by 5.2%, resulting from a combination of slower demand growth and lower oil prices.

Despite the significant uncertainty surrounding the evolution of trade tensions throughout the year, cargo demand was performing relatively well as of April, with a year-on-year increase of 5.8%.

Expenses

Industry expenses are expected to grow to $913 billion in 2025 (+1.0% on 2024).

Jet fuel prices are projected to average $86 per barrel in 2025, which is significantly lower than the average of $99 per barrel expected in 2024. This decrease will lead to a total fuel expenditure of $236 billion, representing 25.8% of all operating costs. This figure is $25 billion less than the $261 billion forecasted for 2024. Recent financial data indicates that there has been minimal fuel hedging activity over the past year, suggesting that airlines are likely to benefit from the lower fuel costs. Additionally, fuel prices are not expected to be affected by trade tensions.

The production of Sustainable Aviation Fuel (SAF) is expected to reach two million tonnes (Mt) by 2025, representing only 0.7% of total airline fuel consumption. This marks a doubling of the one million tonnes produced in 2024, all of which was purchased by airlines. However, to align with the industry’s commitment to achieve net-zero carbon emissions by 2050, production must increase exponentially to meet future demands.

IATA estimates that in 2024, the average cost of Sustainable Aviation Fuel (SAF) will be 3.1 times that of jet fuel, leading to an additional total cost of $1.6 billion. In 2025, the global average cost for SAF is expected to rise to 4.2 times that of jet fuel. This increased cost is primarily due to “compliance fees” imposed by European fuel suppliers, aimed at offsetting potential expenses resulting from European mandates requiring a 2% inclusion of SAF in the jet fuel supply.

“The behavior of fuel suppliers in fulfilling the SAF mandates is an outrage. The cost of achieving net zero carbon emissions by 2050 is estimated to be an enormous $4.7 trillion. Fuel suppliers must stop profiteering on the limited SAF supplies available and ramp up production to meet the legitimate needs of their customers,” said Walsh.

The cost of the Carbon Offsetting Reduction Scheme for International Airlines (CORSIA) to airlines is expected to reach $1 billion in 2025. The market for CORSIA credits will grow, but Guyana is the only country that has issued certificates for the high-quality credits that the scheme requires.

Fleet/Supply Chain

The aircraft backlog exceeds 17,000 (sharply up from the 10,000-11,000 pre-pandemic), with an implied wait time of 14 years. Should states exit from a multilateral agreement exempting aircraft from tariffs, supply chain constraints and production limitations could be further aggravated.

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 (using larger aircraft than needed on some routes, for example).

1,692 aircraft are expected to be delivered in 2025. 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 until 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. The number of aircraft younger than 10 years in storage is currently more than 1,100, constituting 3.8% of the total fleet compared with 1.3% between 2015 and 2018. Nearly 70% of these grounded aircraft are equipped with PW1000G engines.

“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. 

Risks

With ongoing geopolitical and economic uncertainties, the most significant risks to the industry outlook include:

• Conflict: Resolving conflicts, such as the Russia-Ukraine war, would benefit airlines by 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, 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.
• Fragmentation: Global standards have always been critical for aviation. Fragmentation of global standards or weakening multilateral institutions and agreements could bring additional costs to airlines with a more complex or unstable regulatory environment. This includes the evolution of policies on climate, trade, facilitation and many other matters impacting airline strategic decision-making and operations.
• Oil prices: Oil prices are a major driver of airline profitability. The complex array of factors impacting oil prices (including economic growth projections, the amount of extraction activity undertaken, policies on decarbonization, sanctions, availability of refining capacity, and transport blockages) can produce quick shifts in pricing volatility with a significant impact on airline financial prospects.

Regional Roundup

All regions are anticipated to achieve collective net profits by 2025. Most regions are expected to see improved financial performance compared to 2024, with Latin America being the exception. Profitability, however, varies significantly by airline and region. African airlines are projected to have the weakest collective net profit margin at 1.3%, while carriers in the Middle East are forecasted to have the strongest margin at 8.7%.

North America

North America is projected to generate the highest absolute profit among all regions, despite anticipated challenges due to a slowdown in the US economy. Increased tariffs are likely to affect both consumer and business sentiment, leading to a reduction in consumption and investment. Additionally, a persistent shortage of pilots and ongoing engine reliability issues, especially in the low-cost sector, will hinder growth in the region.

Europe

Europe is set to experience a surge in passenger demand, fueled by growth in the low-cost airline sector. Many aircraft that were previously grounded due to engine issues will return to service, enhancing fleet capabilities. Additionally, the European Union’s open skies agreements with North Africa will create new market opportunities. A stronger Euro will also increase profitability for carriers in the region, as most costs, including fuel, are primarily denominated in US dollars.

Asia Pacific

The Asia Pacific region is the largest market in terms of Revenue Passenger Kilometres (RPK), with China representing over 40% of the region’s air traffic. Passenger demand is expected to remain strong due to the relaxation of visa requirements in several Asian countries, especially China, Vietnam, Malaysia, and Thailand. This change will boost both international tourism and domestic travel within the region.

However, the economic outlook presents challenges, particularly with a downward revision of GDP forecasts for the region, especially for China. While flights between China and the United States are currently limited to 100 weekly frequencies—significantly lower than pre-COVID levels—there are signs of improvement regarding overcapacity issues, thanks to better fleet management between domestic and international travel.

Latin America

Latin America hosts a mix of airlines that are thriving and others facing significant financial challenges. The region’s airlines are affected by weak domestic currencies, as key expenses such as fleet costs and debt servicing are paid in US dollars. Argentina’s recent signing of open skies agreements with several countries is a positive development that will improve connectivity and competition, benefiting both airlines and passengers. However, the proposed 26.5% VAT on tickets in Brazil could greatly impact the market. Notably, this is the only region where profitability is projected to decrease compared to 2024.

Middle East

The Middle East is expected to achieve the highest net profit per passenger among all regions. Strong economic performance is driving high demand for air travel, both for business and leisure. However, delays in aircraft deliveries will create capacity constraints as airlines focus on retrofitting and modernizing their fleets, which may limit growth.

Africa

African airlines are encountering high operational costs and a low willingness to spend on air travel in many of their home markets. Additionally, a lack of aircraft and spare parts is hindering growth in the region. The shortage of foreign currency, especially US dollars, further complicates the challenges faced by these airlines. Despite these difficulties, there is a steady demand for air travel across Africa.

The Traveller’s Viewpoint

Air travel provides significant value to consumers. An April 2025 public opinion poll, commissioned by IATA, surveyed 6,500 respondents from 15 countries who had taken at least one trip in the past 12 months. The results revealed that 97% of travellers expressed satisfaction with their travel experiences, with 58% indicating they were highly satisfied. Additionally, 89% agreed that air travel enhances their lives, 81% valued the variety of options available in travel planning, and 78% believed that air travel offers good value for money.

Passengers count on a safe, sustainable, efficient, and profitable airline industry. IATA public opinion polling demonstrated the critical role that travellers see the airline industry playing:

• 90% agreed that air travel is a necessity for modern life
• 90% agreed that air connectivity is critical to the economy
• 89% said that air travel has a positive impact on societies
• 82% said that the global air transport network is a key contributor to the UN Sustainable Development Goals
• 84% care about the success of the aviation industry
• 88% care about their ability to fly in the future

The air transport industry is dedicated to achieving net-zero CO2 emissions by 2050. Travellers show strong confidence in this goal, with 81% agreeing that the industry is committed to collaborating to reach this ambitious target. Furthermore, 77% believe that aviation leaders are genuinely addressing the climate challenge, a figure significantly higher than the 64% for government leaders and 60% for the oil sector.