Global Upheavals Notwithstanding, Airline Industry Marks Improved Profitability

• Airline profitability improves in 2025 with net margins rising to 3.7% from 3.4%, driven by lower jet fuel prices. Total revenues at a record high of $979 billion.
• Passenger numbers reach nearly 5 billion and cargo volumes hit 69 million tonnes, despite trade tensions and supply chain issues.
• Geopolitical risks, tariffs, and supply chain disruptions, including a 17,000 aircraft backlog, pose significant challenges.

The International Air Transport Association (IATA), at its annual general meeting (AGM) in New Delhi today, is optimistic about the airline sector, which is showing improved profitability over 2024 and resilience in the face of global economic and political shifts. IATA noted that traveller numbers touched nearly 5 billion (+4% on 2024), and total air cargo volumes reached 69 million tonnes (+0.6% on 2024).  

2025 Uncertainties in Global Markets

“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 is 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 in 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.

Outlook Drivers

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. 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. 

Meanwhile, continued strong employment and moderating inflation projections are expected to keep demand growing, even if not as fast as previously projected. 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. 

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

Cargo Revenues Impacted by Tariffs

Cargo revenues are expected to be $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. As a result, air cargo growth is expected to slow to 0.7% in 2025 (from 11.3% in 2024). 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.

Aircraft Backlog Exceeds 17,000

IATA noted that 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 utilisation (using larger aircraft than needed on some routes, for example). 

1,692 Aircraft to be delivered in 2025

In 2025, 1,692 aircraft are expected to be delivered, IATA said and cautioned that there could be a further downward revision, 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. The number of aircraft younger than 10 years in storage is currently over 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.  

Risks

With ongoing geopolitical and economic uncertainties, the most significant risks to the industry outlook include the continuing of the Russia-Ukraine war; tariffs and trade policies by the Trump administration; unstable regulatory environment; and oil prices. 

Americas, Europe, Africa and the Middle East Outlook

On June 1, the leitmotif of the three presentations from three major regions—the Americas, Europe, Africa and the Middle East—indicated that while aviation demand is picking up across continents, headwinds continue to prevail in terms of conflicts, taxation, regulatory issues, sustainability challenges, and supply chain disruptions. 

Kamil Al-Awadhi, Regional Vice President for Africa and the Middle East, said while global passenger demand was at 6.0%, Africa’s passenger demand was up 9%, and the Middle East’s demand was up 6%. Cargo demand in both regions was down, at 5.3% in the Middle East and 5.5% in Africa, though it was higher than the global cargo demand, at 3.4%.

The challenges before Africa, he pointed out, are barriers: weak regional links (with only 20% serving intra-African routes), market competitiveness (over 75% of international passengers fly on non-African carriers) and inadequate infrastructure.  

Passenger Demand May Dip in Pockets in Americas

The Vice President of IATA, Americas, Peter Cerdá, said that aviation supports 8.4 million jobs and accounts for 1.4 trillion USD to GDP in North America, while Latin America & the Caribbean support 8.3 million jobs and 240 billion USD to GDP, but there were certain pockets which may weigh down the sector.  

Europe May See Suppressed Demand

The Regional Vice President for Europe, IATA, Rafael Schvartzman, said air transport is highly competitive in Europe with transparent pricing. If airlines pass on extra costs, it is likely to suppress demand, making some routes unviable. Uncompetitive policies have been adding costs to airlines, making air travel more expensive, depressing Europe’s total economic competitiveness and prosperity.