The global aviation industry is expected to continue growing in 2025

The International Air Transport Association (IATA) announced its financial outlook for the global airline industry to 2025, which shows a slight strengthening in profitability amid ongoing cost and supply chain challenges. Highlights include:

Net earnings are expected to be $36.6 billion in 2025, representing a net profit margin of 3.6%. This is a slight improvement from the projected net earnings of $31.5 billion in 2024 (net profit margin of 3.3%). Average net earnings per passenger are expected to be $7.0 (down from a peak of $7.9 in 2023, but an improvement from $6.4 in 2024).

Operating profit in 2025 is expected to be $67.5 billion for a net operating margin of 6.7% (better than the 6.4% expected in 2024).

Return on invested capital (ROIC) for the global industry is expected to be 6.8% in 2025. While this is an improvement on the 2024 ROIC of 6.6%, global industry returns are still below the weighted average cost of capital. ROIC is highest for airlines in Europe, the Middle East and Latin America, where it exceeded the cost of capital.

Total industry revenue is expected to reach $1.007 trillion, up 4.4% from 2024 and marking the first time industry revenue has surpassed the $1 trillion mark. Expenditures are expected to grow 4.0% to $940 billion.

Passenger numbers are expected to reach 5.2 billion in 2025, an increase of 6.7% compared to 2024 and the first time passenger numbers have surpassed the five billion mark.

Cargo volumes are expected to reach 72.5 million tonnes, an increase of 5.8% compared to 2024.

“We expect airlines to generate global profits of $36.6 billion in 2025. This profit will be hard-won, as airlines take advantage of lower oil prices while maintaining load factors above 83%, tightly controlling costs, investing in decarbonization, and managing a return to more normal growth levels following the extraordinary recovery from the pandemic. All of these efforts will help mitigate several drags on profitability that are beyond airlines’ control, namely persistent supply chain challenges, infrastructure weaknesses, burdensome regulation, and rising tax burdens,” said Willie Walsh, IATA’s Director General.

“By 2025, industry revenues will exceed $1 trillion for the first time. It’s also important to put that into perspective. $1 trillion is a lot – almost 1% of the global economy. That makes airlines a strategically important industry. But remember that airlines have $940 billion in costs, not to mention interest and taxes. They retain a net profit margin of just 3.6%. Put another way, the cushion between profit and loss, even in the good year we expect for 2025, is just $7 per passenger. With margins that thin, airlines must continue to watch every cost and insist on similar efficiency throughout the supply chain, especially from our monopolistic infrastructure providers who too often let us down on performance and efficiency,” said Walsh.

IATA highlighted the broad benefits of increasing connectivity. The most recent estimates show that airline employment is expected to grow to 3.3 million by 2025. Airlines are at the heart of a global aviation value chain that employs 86.5 million people and generates an economic impact of $4.1 trillion, representing 3.9% of global GDP (2023 figures). Connectivity is an economic catalyst for growth in almost every industry.

“By 2025, for the first time, the number of travellers will exceed five billion and the number of flights will reach 40 million. This growth means that aviation connectivity will create and support jobs across the global economy. The most obvious are the hospitality and retail sectors, which will be geared up to meet the needs of ever-increasing numbers of customers. But almost all businesses benefit from the connectivity that air transport provides, making it easier to meet customers, receive supplies or transport products. On top of this, aviation growth also contributes to achieving almost all of the United Nations Sustainable Development Goals (SDGs),” said Walsh.

Outlook Controllers

Overall financial performance is expected to improve in 2025 thanks to lower jet fuel prices and efficiency improvements. Forced capacity discipline resulting from unresolved supply chain issues is holding back further increases. This is limiting growth opportunities and increasing several cost items, including aircraft leasing and maintenance.  

Net profitability will also be reduced as airlines are expected to use up their tax losses accumulated during the pandemic era, leading to an increase in tax rates in 2025.

Revenue

Revenue is expected to grow 4.4% to $1.007 trillion by 2025.

Passenger revenue is expected to reach $705 billion (70% of total revenue) with an additional $145 billion (14.4% of total revenue) coming from ancillary services by 2025. Travel remains more affordable, with passenger yields expected to fall by 3.4% (tickets and ancillary services). Unit revenue is expected to fall by a more moderate 2.5%.

Put another way, the average airfare price in 2025, including ancillaries, is expected to be $380, which is 1.8% lower than in 2024. In real terms (adjusted for inflation), that represents a 44% drop compared to 2014, indicating that significant value is being passed on to consumers in the industry’s ongoing effort to improve efficiency.

Passenger demand (RPK) is expected to grow by 8.0% in 2025, outpacing the projected capacity expansion (ATK) of 7.1%. Aircraft departures are forecast to reach 40 million, an increase of 4.6% from 2024, and the average passenger load factor is forecast to be 83.4%, 0.4 percentage points higher than in 2024.

IATA's public opinion surveys confirm an optimistic outlook on passenger demand. If we compare the next 12 months with the previous 12 months:

41% of surveyed travelers said they expect to travel more, 53% expect to travel as frequently, and 5% expect to travel less.
47% of surveyed travelers said they expect to spend more on travel, 46% expected travel spending to remain the same, and 8% expected to spend less.
Cargo revenue is expected to reach $157 billion (15.6% of total revenue) in 2025. Demand is likely to grow by 6.0% and average yield is likely to be adjusted downward by 0.7%, but still remain well above pre-pandemic levels. Freight rates (quoted in 2014 dollars/kg) are expected to be $1.34, down $0.06 from 2024 and 24.4% below 2014 levels.

Several trends are expected to remain favorable for air cargo in 2025. These include continued geopolitical uncertainty in maritime shipments passing through the Suez Canal and the rise of e-commerce originating in Asia.

Costs

Costs are expected to grow by 4.0% to $940 billion in 2025.

Non-fuel: Higher costs across the board outside of fuel were seen in 2024, putting pressure on margins. Key cost issues included intense wage pressure and extraordinary expenses related to several airline employee strikes in 2024. In addition, there has been a sharp increase in maintenance costs due to aircraft groundings and an aging global fleet. Overall non-fuel unit costs increased 1.3% in 2024 to total $643 billion. Non-fuel unit cost increases in 2025 are expected to be limited to 0.5%, reaching $692 billion.

The largest non-fuel cost is labor. In 2025, labor costs are expected to total $253 billion, up 7.6% from 2024. However, with productivity gains, average unit labor costs are likely to increase only 0.5% in 2025 compared to 2024. The airline workforce is projected to increase 4% to 3.3 million people.

Fuel: Jet fuel prices fell to $70 per barrel in September 2024 for the first time since the start of the war between Russia and Ukraine. In 2025, jet fuel is expected to average $87 per barrel (up from $99 per barrel in 2024), based on a jet fuel price spread of $12 per barrel and a crude oil price of $75 per barrel (Brent). As a result, cumulative airline fuel expenditures are expected to be $248 billion, a 4.8% decrease despite a 6% increase in the amount of fuel expected to be consumed (107 billion gallons). Fuel is expected to account for 26.4% of operating costs in 2025, up from 28.9% in 2024.

The cost of CORSIA compliance (purchasing carbon credits) began to materialise in 2024 and is estimated at $700 million, rising to $1 billion in 2025. The costs of the limited quantities of sustainable aviation fuel available are expected to add $3.8 billion to industry fuel costs in 2025, up from $1.7 billion in 2024.

The traveler's point of view

Air travel continues to provide value to consumers. A recent public opinion survey (14 countries, 6,500 respondents who had taken at least one trip in the past year) found that 96% of travellers were satisfied with their trips. Furthermore, 88% agreed that air travel improves their life and 78% agreed that air travel is good value for money.

Passengers count on a safe, sustainable, efficient and profitable airline industry. IATA's public opinion surveys demonstrated the important role that travellers believe the airline industry plays:

90% agreed that air travel is a necessity for modern life
90% agreed that air connectivity is critical to the economy
88% said air travel has a positive impact on societies and
83% said the global air transport network is a key contributor to the UN SDGs
84% ​​care about the success of the aviation industry
The air transport industry is committed to its goal of achieving net-zero CO2 emissions by 2050. Travelers are expressing high levels of confidence in this endeavour: 81% agree that the industry is demonstrating a commitment to working together to achieve its ambitious goal and 77% agree that aviation leaders are taking the climate challenge seriously.

The International Air Transport Association (IATA) also released data on global passenger demand in October 2024 with the following highlights:

Total demand, measured in passenger kilometres (RPK), increased by 7.1% compared to October 2023. Total capacity, measured in available seat kilometres (ASK), increased by 6.1% year-on-year. The load factor for October was 83.9% (+0.8ppt compared to October 2023).
International demand increased by 9.5% compared to October 2023. Capacity increased by 8.6% year-on-year and the load factor was 83.5% (+0.6ppt compared to October 2023).
Domestic demand increased by 3.5% compared to October 2023. Capacity increased by 2.0% year-on-year and the load factor was 84.5% (+1.2ppt compared to October 2023).

“The continued strong and stable demand is good news, but equally important is the constant improvement in load factors, which demonstrates the great work the industry is doing to transport passengers more efficiently.

“Average seat load factors have increased from around 67% in the 1990s to over 83% today. Policymakers considering trying to tax passengers to cut emissions should take this into account. Even if fewer people are travelling because taxes make it too expensive, that doesn’t automatically mean lower emissions because planes will still fly, just with fewer passengers. That would reverse decades of hard-won progress. We need to see full planes to deliver the economic and social benefits of low-emission travel,” said Willie Walsh, IATA’s Director General.

Regional breakdown: international passenger markets

All regions showed growth for international passenger markets in October 2024 compared to October 2023. Europe had the highest load factors and Africa showed a strong increase, but the Americas and the Middle East suffered declines.

Asia-Pacific airlines achieved a year-on-year increase in demand of 17.5%. Capacity increased by 17.2% year-on-year and load factor was 82.9% (+0.3 ppt compared to October 2023).

European airlines recorded a year-on-year increase in demand of 8.7%. Capacity increased by 7.3% year-on-year and load factor was 85.7% (+1.1ppt compared to October 2023).

Middle East airlines reported a year-on-year increase in demand of 2.2%. Capacity increased by 2.5% year-on-year and load factor was 80.2% (-0.2 pp compared to October 2023).

North American airlines experienced a year-over-year increase in demand of 3.2%. Capacity increased by 2.9% year-over-year and load factor was 84.2% (+0.3 ppt compared to October 2023).

Latin American airlines recorded a year-on-year increase in demand of 10.9%. Capacity increased by 11.6% year-on-year. Load factor was 85.3% (-0.6ppt compared to October 2023).

African airlines recorded a year-on-year increase in demand of 10.4%. Capacity increased by 5.3% year-on-year. Load factor increased to 73.2% (+3.4 ppt compared to October 2023).

Domestic passenger markets

In the United States there was a surprisingly slight decline, while all other key domestic markets showed stable growth. China's rapidly growing domestic demand is being met by increased use of wide-body aircraft.

Source: IATA.