IATA AGM- Industry headwinds, but airline profitability to rise (slightly!)

The International Air Transport Association (IATA) anticipates improved airline profitability for 2025 and resilience in the face of continued global economic and political shifts. However, its projections represent a fall in net profits on its previous released numbers, but margins are expected to increase.

In an update to its 2025 airline industry financial outlook, released at its AGM in New Delhi, India, IATA predicted industry net profits of USD36.0 billion, improved from the USD32.4 billion earned in 2024. This is slightly down on the previously projected USD36.6 billion (Dec-2024).

The projected net profit margin at 3.7% is an improvement from the 3.4% earned in 2024 and up 0.1pp on the previously projected 3.6%. Return on invested capital at 6.7%, is also an improvement from the 6.6% earned in 2024, but largely unchanged from previous projections.

Operating profits at USD66.0 billion, are also an improvement from an estimated USD61.9 billion in 2024, but down from the previously projected USD67.5 billion.

The standout projection though is that the industry will not exceed the anticipated USD1 trillion revenues, albeit will still hit record annual levels. Total revenues are projected to reach USD979 billion (+1.3% on 2024). Total expenses will hit USD913 billion (+1.0% on 2024, but below the previously projected USD940 billion).

Total traveller numbers will also reach a record high but will again miss a key milestone. An anticipated 4% rise over 2024 will bring annual passenger traffic to 4.99 billion for 2025, a revision from the 5.22 billion projection from the end of 2024.

Total air cargo volumes will follow the same trend reaching 69 million tonnes, up 0.6% on 2024, but below the previously projected 72.5 million tonnes.

Summary

• IATA forecasts airline industry net profits to reach USD36 billion in 2025, with improved margins but slightly lower than previous projections.
• Total industry revenues are expected to hit a record USD979 billion in 2025, though still falling short of the USD1 trillion milestone.
• Passenger numbers are projected to rise 4% to 4.99 billion in 2025, a record high but below earlier estimates.
• Falling jet fuel prices, down 13% from 2024, are a key positive driver for improved airline profitability.
• Despite global economic uncertainties and slower GDP growth, strong employment and moderating inflation are expected to sustain demand.
• Passenger load factors are set to reach an all-time high of 84%, while average airfares continue to decline, benefiting travellers.

1H2025 has brought 'significant uncertainties' to global market

After entering the year with optimism having completed a strong recovery from COVID-19, the first half of 2025 has brought "significant uncertainties" to global markets, says Willie Walsh, IATA's Director General.

Nonetheless, by many measures including net profits, it will still be a better year for airlines than 2024. The uncertainties have been balanced the price of jet fuel which has fallen 13% compared with 2024 and is even below the previous estimates of IATA. Mr Walsh describes this as "the biggest positive driver" for industry profitability.

"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," he confidently projects.

The result of this is an improvement of net margins from 3.4% in 2024 to 3.7% in 2025. That is obviously a positive, but still much lower than business standards. But considering the headwinds, Mr Walsh says "it's a strong result" that "demonstrates the resilience that airlines have worked hard to fortify".

As a standalone figure, the USD36 billion profit figure sounds significant, but perspective is critical to put into context such large industry-wide aggregate figures. This equates to just a USD7.20 net profit per passenger per segment.

Mr Walsh says positively that this is "a thin buffer" but add 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," he says.

GDP growth is stalling, but moderating inflation projections will keep demand growing

It is widely recognised that Gross Domestic Product (GDP) is the traditional driver of airline economics. However, although global GDP growth is expected to fall from 3.3% in 2024 to 2.5% in 2025, IATA believes airline profitability will improve.

This is largely on the back of falling oil prices. Meanwhile, continued strong employment and moderating inflation projections are also expected to keep demand growing, even if not as fast as previously projected.

IATA identifies efficiency as 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%, it says, as fleet expansion and modernisation remains challenging amid supply chain failures in the aerospace sector.

It is expected that passenger yields will 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 travellers benefiting from ever-more affordable air travel.

The real average return airfare (in 2024 US dollars) is expected to be USD374 in 2025, says IATA. For comparison, this is 40% below 2014 levels.

IATA's Apr-2025 polling data supports projections for demand growth

IATA's projections are supported by its own polling data. This shows that 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 that they expect to travel as much as they did in the previous 12 months. Only 6% reported that they expect to travel less.

Just below half (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 impacted, 68% of business travellers (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.