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

Despite the uncertainties caused by geopolitical tensions and trade disputes, airlines are projected to see a modest profit increase to $36 billion in 2025, up from $32.4 billion last year, primarily due to falling fuel prices. The International Air Transport Association (IATA) announced this during their Annual General Meeting in New Delhi.
This revised projection slightly lowers the earlier estimate of $36.6 billion made in December. “Considering the challenges, it showcases the resilience that airlines have diligently worked to strengthen,” stated Willie Walsh, IATA’s Director General. IATA represents over 300 airlines worldwide.

The major contributing factor to this growth is the 13% reduction in jet fuel prices compared to 2024 and 1% lower than earlier forecasts.

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“We also expect airlines to transport more passengers and cargo in 2025 than they did in 2024, despite previous demand forecasts being impacted by trade issues and declining consumer confidence. This will result in an improvement of net margins from 3.4% in 2024 to 3.7% in 2025,” Walsh emphasized.

However, Walsh cautioned that the margin remains tight. Any new taxes, increases in airport or navigation fees, demand shocks, or expensive regulations could quickly reverse the industry’s progress and put its resilience to the test.

Leaders within the industry have expressed concerns that ongoing geopolitical tensions resulting in airspace closures greatly hinder financial stability.

“As zones of conflict become more prevalent, we urge governments to ensure that civil aviation is never targeted by military actions, whether intentionally or accidentally. Sharing information is crucial to achieving this,” Walsh pointed out.

Delays in aircraft deliveries have made it difficult for airlines to satisfy the surging travel demands in specific regions, while also increasing operational costs, as airlines must rely on older jets or pay premium prices for a dwindling supply of spare parts.

Projected passenger numbers are set to reach a record 4.99 billion in 2025, marking a 4% increase year-on-year, with occupancy rates climbing to 84%. Passenger revenues are forecasted to rise to $693 billion, bolstered by a 6.7% increase in ancillary revenue. The real average return airfare is expected to drop to $374, nearly 40% lower than in 2014, driven by lower fuel costs and heightened competition.

(Originally published on Jun 02, 2025)

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