IATA 2025 Outlook: Strengthened Profitability Amid Supply Chain Challenges

The International Air Transport Association (IATA) has projected a slight strengthening in profitability for the global airline industry in 2025, despite ongoing challenges in the supply chain and rising costs.

IATA’s financial outlook shows:

– Net profits are expected to rise to $36.6 billion in 2025, with a 3.6 percent net profit margin, compared to $31.5 billion (3.3 percent margin) in 2024. Average net profit per passenger will be $7.0, slightly below 2023’s $7.9 but an improvement from $6.4 in 2024.

– Operating profit will be $67.5 billion, marking a net operating margin of 6.7 percent, up from 6.4 percent in 2024.

– Total industry revenue will exceed $1 trillion for the first time, reaching $1.007 trillion, a 4.4 percent increase from 2024. Passenger traffic is expected to grow by 6.7 percent to 5.2 billion passengers.

– Cargo volume is forecast to rise by 5.8 percent to 72.5 million tonnes in 2025.

According to IATA Director General Willie Walsh, the expected profit increase will be hard-earned, as airlines continue managing cost pressures from persistent supply chain issues, regulatory challenges, and rising taxes.

Walsh pointed out that with margins as thin as $7 per passenger, airlines must maintain tight cost controls and efficiency, particularly from infrastructure suppliers.

In 2025, passenger demand is expected to grow by 8.0 percent, outpacing the 7.1 percent rise in capacity. The average passenger load factor will rise to 83.4 percent, and airline revenues from passengers will account for 70 percent of total industry revenue. However, the average airfare, including ancillaries, is projected to fall by 1.8 percent, reflecting the industry’s effort to improve efficiency and pass value to consumers.

In cargo, revenues are expected to reach $157 billion, with demand growing by 6.0 percent, though average yields will slightly decrease by 0.7 percent. This continues to reflect strong e-commerce growth and geopolitical uncertainties impacting sea shipments.

While fuel prices are expected to decline in 2025 to $87 per barrel (down from $99 in 2024), the airline industry faces significant cost pressures. Labor costs are anticipated to rise by 7.6 percent to $253 billion, contributing to an overall cost growth of 4.0 percent, reaching $940 billion. The industry will also continue to face compliance costs related to carbon reduction goals.

Risks to the outlook include geopolitical instability, particularly the Russia-Ukraine conflict and tensions in the Middle East. A slowdown in global economic growth or higher oil prices could also dampen profitability.

Despite these challenges, IATA highlighted the economic importance of air transport, which supports 86.5 million jobs globally and generates $4.1 trillion in economic impact. Airlines remain a crucial part of the global economy, with connectivity supporting industries ranging from hospitality to retail and contributing to sustainable development goals (SDGs).

Regional Performance

Photo source: IATA

Profitability will improve across all regions, with the Middle East expected to continue leading in profit margins, and North America generating the largest absolute profit. However, challenges remain in Africa due to high operational costs, and Asia-Pacific may see a slight improvement in profitability after experiencing declines in 2024.

Europe faced numerous challenges impacting competitiveness in 2024, including rising wages, fleet groundings, noise-related flight restrictions, increasing airport charges, onerous regulations, and high national taxes. The ongoing war in Ukraine continues to affect the continent’s carriers, with 20 percent of its airspace closed, resulting in longer routes to some Asia destinations as Russian airspace remains off-limits to European carriers. Nonetheless, 2025 is expected to see a slight upturn in profitability, largely driven by the low-cost carrier (LCC) sector as it recovers from the 2024 peak in fleet groundings due to supply chain issues.

Traveler sentiment remains strong, with 96 percent of surveyed travelers expressing satisfaction with air travel, and 90 percent recognizing its importance to modern life and the economy. Airlines are committed to achieving net-zero emissions by 2050, with strong public support for sustainability initiatives.