Lower Jet Fuel Prices And Efficiency Gains Will Propel Airlines’ Finances In 2025: IATA

As per 2023 figures, the global aviation value chain employs 86.5 million people and generates $4.1 trillion in economic impact, accounting for 3.9 per cent of global GDP. The airline employment is expected to grow to 3.3 million in 2025

The International Air Transport Association (IATA) has announced its financial outlook for the global airline industry in 2025. It forecasts strengthening of profitability and further rises in annual passenger traffic figures, which will breach the five billion passenger mark for the first time in the industry’s history.

According to IATA’s Director General, Willie, the net profits for the global airlines industry in 2025 are expected to be $36.6 billion based on a 3.6 per cent net profit margin. Describing the 2025 net profits figure as a “slight improvement” over the expected $31.5 billion net profit for 2024 (3.3 per cent net profit margin).

Total industry revenues are expected to be $1.007 trillion, representing an increase of 4.4 per cent from 2024. The figure will mark the first time that annual industry revenues have broken the $one trillion mark in a single year.

Operating profit in the coming year is also expected to be $67.5 billion for a net operating margin of 6.7 per cent (improved from 6.4 per cent expected in 2024). Expenses are expected to grow by four per cent to $940 billion. The return on invested capital (ROIC) for the global industry is expected to be 6.8 per cent in 2025, which is an improvement from the 2024’s 6.6 per cent, while returns at the global level remain below the weighted average cost of capital.

Passenger numbers are forecast to reach 5.2 billion in 2025, a 6.7 per cent rise compared to 2024 and the first time that the number of passengers has exceeded the five billion mark. Cargo volumes are expected to reach 72.5 million tons, a 5.8 per cent increase from 2024.

“We’re expecting airlines to deliver a global profit of $36.6 billion in 2025,” said Walsh. “This will be hard-earned as airlines take advantage of lower oil prices while keeping load factors above 83 per cent, tightly controlling costs, investing in decarbonization, and managing the return to more normal growth levels following the extraordinary pandemic recovery. All these efforts will help to mitigate several drags on profitability that are outside of airlines’ control like persistent supply chain challenges, infrastructure deficiencies, onerous regulation, and a rising tax burden.

“In 2025, industry revenues will exceed $one trillion for the first time. It’s also important to put that into perspective. A trillion dollars is a lot, almost one per cent of the global economy. That makes airlines a strategically important industry. But remember that airlines carry $940 billion in costs, not to mention interest and taxes. They retain a net profit margin of just 3.6 per cent,” Walsh added.

“Put another way, the buffer between profit and loss, even in the good year that we are expecting in 2025, is just $seven per passenger. With margins that thin, airlines must continue to watch every cost and insist on similar efficiency across the supply chain, especially from our monopoly infrastructure suppliers who all too often let us down on performance and efficiency,” Walsh said.

Highlighting the broad benefits of growing connectivity, Walsh described IATA airlines as the core of a global aviation value chain that employs 86.5 million people and generates $4.1 trillion in economic impact, accounting for 3.9 per cent of global GDP in 2023 figures. IATA said the most recent estimates showed that airline employment is expected to grow to 3.3 million in 2025.

“Looking at 2025, for the first time, traveler numbers will exceed five billion and the number of flights will reach 40 million,” commented Walsh. “This growth means that aviation connectivity will be creating and supporting jobs across the global economy. The most obvious are the hospitality and retail sectors which will gear up to meet the needs of a growing number of customers.”

“But almost every business benefits from the connectivity that air transport provides, making it easier to meet customers, receive supplies, or transport products. On top of this, growth in aviation also contributes to achieving almost all the UN’s Sustainable Development Goals (SDGs),” he added.

In IATA’s outlook for 2025, the organization predicts that overall financial performance is expected to improve on the back of lower jet fuel prices and efficiency gains. However, further increases are being held back by forced capacity discipline resulting from unresolved supply chain issues at the major manufacturers. IATA added that this issue is limiting growth opportunities and driving up several cost areas, including aircraft leasing and maintenance. Net profitability will also be squeezed as airlines are expected to exhaust their tax losses carry forwards from the pandemic era, leading to an increase in tax rates in 2025.

On the positive side, global passenger traffic is set to continue its upward trajectory, with IATA predicting 5.2 billion passengers will travel by air next year, an increase of 6.7 per cent over 2024.