Aviation Poised for Profit Growth in 2025 — IATA

The International Air Transport Association (IATA) has unveiled its financial outlook for the global airline industry in 2025, projecting a modest improvement in profitability amidst ongoing supply chain disruptions and cost pressures. This forecast underscores the resilience of the aviation sector, which continues to navigate complex operational challenges while demonstrating steady financial growth.

Issue: 6 / 2024By Rohit GoelPhoto(s): By Fraport AG, Dubai Airports
For the first time in aviation history, total industry revenues are projected to exceed the trillion-dollar threshold, reaching $1.007 trillion in 2025

According to IATA, the global airline industry is expected to achieve net profits of $36.6 billion in 2025, equating to a 3.6 per cent net profit margin. This marks a slight improvement over the projected $31.5 billion net profit in 2024, with a margin of 3.3 per cent. While the average net profit per passenger is anticipated to reach $7.0, this figure remains below the 2023 peak of $7.9, though it surpasses the expected $6.4 in 2024. These incremental gains reflect the industry’s ability to adapt and thrive despite persistent challenges.

STRENGTHENED PROFITABILITY EXPECTED IN 2025 DESPITE PERSISTENT SUPPLY CHAIN CHALLENGES

Operating profits are forecasted to rise to $67.5 billion in 2025, corresponding to a 6.7 per cent operating margin, a modest improvement from the 6.4 per cent margin anticipated in 2024. Meanwhile, the return on invested capital (ROIC) is expected to grow to 6.8 per cent, up from 6.6 per cent in 2024. However, this figure still falls short of the weighted average cost of capital, indicating room for further financial optimisation. Notably, airlines in regions such as Europe, the Middle East, and Latin America are predicted to surpass the cost of capital, showcasing stronger financial performance compared to other markets.

For the first time in aviation history, total industry revenues are projected to exceed the trillion-dollar threshold, reaching $1.007 trillion in 2025—a 4.4 per cent increase from the previous year. Expenses are also expected to rise by 4.0 per cent, totalling $940 billion, reflecting the ongoing challenges posed by escalating operational costs.

The global aviation industry is set to deliver a hard-earned profit of $36.6 billion in 2025, equating to a net profit margin of just 3.6 per cent

The industry’s growth is further evidenced by significant milestones in passenger and cargo volumes. Passenger numbers are forecasted to surpass the five billion mark, reaching 5.2 billion in 2025—a 6.7 per cent increase from 2024. Similarly, cargo volumes are expected to grow by 5.8 per cent, amounting to 72.5 million tonnes. These figures highlight the robust recovery of global travel demand and the essential role of air cargo in international trade.

Despite facing persistent supply chain issues, the outlook for 2025 paints an optimistic picture of sustained growth and resilience in the airline industry. The sector’s ability to achieve record revenues and passenger numbers signals a promising trajectory, underscoring its strategic importance to the global economy.

AIRLINES TO ACHIEVE RECORD PROFITABILITY AND GROWTH BY 2025: IATA

The global aviation industry is set to reach a significant milestone in 2025, with airlines projected to deliver a hard-earned profit of $36.6 billion, according to Willie Walsh, Director General of the International Air Transport Association (IATA). This achievement reflects the sector’s resilience and strategic management, including leveraging lower oil prices, maintaining high load factors above 83 per cent, controlling costs, and prioritising investments in decarbonisation. These measures are helping airlines mitigate external challenges such as persistent supply chain disruptions, infrastructure inefficiencies, burdensome regulations, and an increasing tax load.

For the first time in aviation history, industry revenues are expected to surpass $1 trillion in 2025. Walsh underscored the strategic importance of the airline industry, which represents nearly one per cent of the global economy. However, he highlighted the slim profit margins, noting that airlines face $940 billion in costs, alongside significant interest and tax obligations, leaving a net profit margin of just 3.6 per cent. “The buffer between profit and loss is razor-thin—just $7 per passenger—even in a promising year like 2025,” Walsh remarked, emphasising the need for rigorous cost control and improved efficiency across the supply chain, particularly from monopoly infrastructure providers that often fall short in performance and efficiency.

Passenger numbers are forecasted to surpass the five billion mark, reaching 5.2 billion in 2025—a 6.7 per cent increase from 2024, highlighting the robust recovery of global travel demand

In addition to financial achievements, the aviation industry continues to expand its economic and social impact. IATA forecasts airline employment will grow to 3.3 million by 2025. This growth is part of a broader aviation value chain supporting 86.5 million jobs and generating $4.1 trillion in economic impact, equivalent to 3.9 per cent of global GDP (2023 figures). Aviation’s connectivity plays a crucial role as an economic catalyst, driving growth across industries and regions.

Passenger numbers are also set to break records, exceeding five billion in 2025, with flights reaching 40 million annually. This growth in connectivity will generate significant opportunities for sectors such as hospitality and retail while enhancing the ability of businesses across the globe to meet customers, receive supplies, and transport goods. Furthermore, the expansion of air travel contributes to achieving nearly all of the United Nations’ Sustainable Development Goals (SDGs), Walsh noted.

As aviation advances into 2025, the industry’s focus on sustainability, operational efficiency, and connectivity reaffirms its critical role in the global economy while highlighting the challenges that must be addressed to ensure long-term profitability and growth.

AVIATION INDUSTRY OUTLOOK FOR 2025: REVENUE, COSTS, AND RISKS

The global aviation industry is poised for an improved financial performance in 2025, driven by a combination of lower jet fuel prices and efficiency gains. However, lingering supply chain disruptions are restraining capacity expansion, pushing up costs in areas such as aircraft leasing and maintenance. These factors, coupled with the anticipated exhaustion of pandemic-era tax loss carry-forwards, are expected to tighten net profitability due to increased tax liabilities.

  • Revenue Projections: Industry revenues are forecast to rise by 4.4 per cent, reaching $1.007 trillion in 2025. Passenger revenues will remain the dominant contributor at $705 billion, or 70 per cent of total revenue, supplemented by $145 billion from ancillary services, which constitute 14.4 per cent of overall earnings.

    Despite revenue growth, passenger yields, which encompass ticket prices and ancillary services, are projected to decline by 3.4 per cent, resulting in a moderate 2.5 per cent drop in unit revenues. The average airfare, inclusive of ancillary fees, is expected to settle at $380—1.8 per cent lower than in 2024. Adjusted for inflation, this figure represents a staggering 44 per cent decrease compared to 2014, underscoring the industry’s commitment to efficiency and delivering value to consumers.

    Passenger demand, measured in revenue passenger kilometres (RPKs), is anticipated to grow by 8.0 per cent, outpacing the 7.1 per cent expansion in available tonne kilometres (ATKs). Aircraft departures are expected to climb by 4.6 per cent, reaching 40 million, while the average passenger load factor is projected to improve to 83.4 per cent.

    Positive traveller sentiment further supports the robust outlook. According to IATA polling, 41 per cent of respondents plan to travel more over the next year, and 47 per cent expect to increase their spending on travel.

    In the cargo segment, revenues are expected to reach $157 billion, accounting for 15.6 per cent of total revenue. Demand is set to grow by 6.0 per cent, while average yields are forecast to decline marginally by 0.7 per cent, yet remain significantly higher than pre-pandemic levels. Geopolitical uncertainties in maritime trade and the continued rise of e-commerce, particularly from Asia, are likely to sustain demand for air cargo.

  • Cost Dynamics: Costs are predicted to rise by 4.0 per cent to $940 billion in 2025, with both fuel and non-fuel expenses playing critical roles in shaping profitability.

    Non-fuel expenses, which reached $643 billion in 2024, are expected to increase by 0.5 per cent in 2025, totaling $692 billion. Labour remains the largest component of these costs, projected to grow by 7.6 per cent to $253 billion. Despite this increase, productivity gains are expected to limit the rise in average labour unit costs to just 0.5 per cent.

    Higher maintenance costs, driven by aircraft groundings and an ageing fleet, will also weigh on budgets. Meanwhile, the airline workforce is anticipated to expand by four per cent, reaching 3.3 million employees globally.

    Jet fuel prices, which dropped to $70 per barrel in September 2024, are forecast to average $87 per barrel in 2025, significantly lower than the $99 per barrel average in 2024. This decrease will translate to a 4.8 per cent reduction in total fuel expenditure, which is expected to amount to $248 billion, even as fuel consumption rises by six per cent to 107 billion gallons.

    Fuel is projected to account for 26.4 per cent of operating costs in 2025, down from 28.9 per cent in 2024. Costs associated with sustainable aviation fuel (SAF) are expected to rise to $3.8 billion, nearly doubling from $1.7 billion in 2024. Additionally, compliance costs under CORSIA are estimated to increase to $1 billion.

  • Key Risks: The outlook for 2025 is tempered by several geopolitical and economic uncertainties.
    • Geopolitical Conflicts: Ongoing conflicts, such as the wars in Europe and the Middle East, pose significant risks to the industry. Escalation could dampen travel demand and disrupt operations, whereas resolution could spur recovery, particularly in regions affected by the Russia-Ukraine war.
    • US Policy Under the Trump Administration: The incoming administration in the United States introduces considerable uncertainty. Potential trade wars and tariffs could negatively impact air cargo demand and business travel. Conversely, probusiness policies, if pursued, may lead to deregulation and operational simplifications, benefiting the sector. However, the administration’s stance on aviation decarbonisation remains unclear, creating challenges for sustainability efforts.
    • Oil Price Volatility: Lower oil prices underpin much of the industry’s optimistic outlook for 2025. Any significant deviation from these expectations could rapidly erode margins in an industry already operating on thin profitability.

    The aviation sector in 2025 promises growth and recovery but remains subject to various pressures, including cost inflation, geopolitical risks, and sustainability challenges. Stakeholders will need to navigate these dynamics carefully to maximise opportunities and mitigate risks.

THE TRAVELLER’S PERSPECTIVE ON AIR TRAVEL

Air travel continues to be a cornerstone of modern life, offering immense value to consumers across the globe. According to a recent public opinion poll conducted across 14 countries with 6,500 respondents who had travelled by air at least once in the past year, an overwhelming 96 per cent of travellers expressed satisfaction with their experience. Additionally, 88 per cent of respondents affirmed that air travel enhances their lives, while 78 per cent agreed that it offers good value for money.

Aviation’s connectivity plays a crucial role as an economic catalyst, supporting 86.5 million jobs, generating $4.1 trillion in economic impact

These figures highlight not only the utility but also the broader societal perception of air travel as an essential service. The International Air Transport Association (IATA) polling further emphasized the critical role the airline industry plays in shaping modern life and global connectivity:

  • 90 per cent of respondents agreed that air travel is indispensable to modern living.
  • 90 per cent saw air connectivity as a vital driver of economic growth.
  • 88 per cent acknowledged the positive societal impact of air travel.
  • 83 per cent recognized the global air transport network’s contribution to the United Nations Sustainable Development Goals (SDGs).
  • 84 per cent expressed concern for the aviation industry’s success, underscoring its significance to global progress.

Sustainability remains a core priority for the aviation industry, which has committed to achieving net-zero carbon emissions by 2050. Encouragingly, travellers demonstrated high levels of confidence in the sector’s environmental ambitions, with 81 per cent of respondents agreeing that the industry is showing a strong commitment to working collectively toward this goal. Furthermore, 77 per cent believed that aviation leaders are taking the climate challenge seriously.

These findings illustrate the symbiotic relationship between travellers and the aviation sector. As passengers increasingly rely on a safe, sustainable, efficient, and profitable airline industry, the shared commitment to environmental responsibility and global connectivity highlights the enduring importance of air transport in shaping a better future.

REGIONAL ROUNDUP

All regions are expected to show improved financial performance in 2025 as compared to 2024, and all regions are expected to deliver a collective net profit in both 2024 and 2025. Profitability, however, varies widely by carrier and by region.

 
North America
Europe
Asia Pacific
Latin America
Middle East
Africa
2024 Net Profit (e)$11.8 b$10.0 b$3.2 b$1.0 b$5.3 b$0.1 b
(Net margin)-3.60%-3.90%-1.30%-2.10%-7.70%-0.80%
Per passenger$10.3$8.2$1.8$3.2$23.1$0.9
2025 Net Profit (f)$13.8 b$11.9 b$3.6 b$1.3 b$5.9 b$0.2 b
(Net margin)-4.20%-4.40%-1.40%-2.40%-8.20%-0.90%
Per passenger$11.8$9.2$1.8$3.8$23.9$1.0
2025 Demand (RPK)3.00%7.00%11.70%8.00%9.50%8.00%
2025 Capacity (ASK)2.80%6.50%10.80%7.90%9.20%7.70%

Source: IATA