Global Outlook Report Projects Minor Increase In Airlines Profit in 2025
The report said passenger traffic growth would decelerate to 5.8% in 2025, from 10.6% in 2024. And, global growth in air cargo in 2025 should slow more substantially, to only 0.7%
New Delhi: The International Air Transport Association (IATA)’s Global Outlook report has projected a minor increase in airlines profit in 2025. It said airlines’ revenues are expected to remain broadly flat compared to 2024 and forecasted a net profit of 36 billion at a still meager 3.7% net profit margin. Protectionism, new US trade policy leading to trade war and global recession are the main reasons for this slow growth.
Although this performance is among the best in the industry’s history, it is nevertheless the case that airlines’ net margin is only half of what all global industries achieve on average, IATA report said.
The report said passenger traffic growth would decelerate to 5.8% in 2025, from 10.6% in 2024. And, global growth in air cargo in 2025 should slow more substantially, to only 0.7%.
“Tariffs will reduce trade, and so will, importantly, the removal of the de minimis exemption, which allowed parcels worth less than $800 to enter the US free of customs procedures. Relative competitiveness also matters, and the decline in ocean cargo rates makes air freight less attractive in comparison,” the report said.
“In such a tumultuous year as 2025 has already proven to be, profits in the airline industry will likely hold up rather well. Lower fuel prices may drive some extra demand. The silver lining of the malfunctioning supply chains is that load factors increase, underpinning profits,” the report added.
It added that aircraft deliveries are now lagging 30% behind their peak levels. The aircraft backlog has risen to a record-high 17,000 aircraft as a result. If the backlog increase were assumed to be caused solely by delivery delays, it would indicate that airlines are short of 5,400 aircraft, 18% of the active fleet. Given the expected annual production of around 2,000 aircraft, this may take 3-5 years to resolve.
IATA Director General Willie Walsh said the real cost of flying has fallen 40 per cent compared to a decade ago despite rising cost and tax challenges. He asserted that airspace should be kept out of trade wars.
Mr Walsh said that $36 billion profit is significant but that equates to just $7.20 per passenger per segment. "It's still a thin buffer and any new tax, increase in airport or navigation charge, demand shock or costly regulation will quickly put the industry's resilience to the test," he said. According to IATA, India's aviation industry directly employs 3,69,700 people and generates $5.6 billion of GDP.