Airline profit will increase despite head winds of geopolitics and trade wars

Despite the uncertainties caused by geopolitical conflicts and trade issues, airlines are likely to see a modest increase in profits to $36 billion in 2025, up from $32.4 billion the previous year, according to the International Air Transport Association (IATA) which shared these insights during their Annual General Meeting in New Delhi. “Given the challenges we face, this is a strong outcome that shows the resilience airlines have built over time,” stated Willie Walsh, IATA’s Director General. The organization includes over 300 airline members. A significant positive factor is the drop in jet fuel prices, which have decreased by 13% compared to 2024 and are 1% lower than prior estimates. “We also expect airlines to transport more passengers and cargo in 2025 than in 2024, despite previous demand forecasts being affected by trade conflicts and dips in consumer confidence. This will result in an improvement in net profit margins from 3.4% in 2024 to 3.7% in 2025,” Walsh elaborated. However, Walsh cautioned that the aviation sector still faces tight margins. Any introduction of new taxes or increases in airport or navigation fees, demand fluctuations, or expensive regulations could challenge the industry’s stability. Industry experts emphasized that geopolitical instability leading to airspace closures poses a severe threat to financial sustainability. “As conflict areas increase, we have urged the UN Security Council to highlight governments’ accountability in ensuring that civil aviation is not unintentionally targeted during military operations. The most effective solution is through information sharing,” Walsh stated. Aircraft delivery delays have hindered airlines’ capacity to respond to rising travel demand, consequently increasing operational costs as airlines are forced to maintain older aircraft or pay higher prices for the decreasing availability of spare parts. Passenger forecasts indicate a potential record of 4.99 billion travelers in 2025, representing a 4% year-over-year increase with occupancy rates climbing to 84%. Additionally, passenger revenues are expected to swell to $693 billion, aided by a growth in ancillary revenue of 6.7%. The average return airfare is projected to decrease to $374, reflecting a 40% reduction since 2014 due to lower fuel costs and strong market competition.