Total 2025 airline industry revenue for the first time should exceed $1 trillion, representing a 4.4 percent increase year over year, according to an International Air Transport Association outlook released Tuesday. The association projects airline expenses to grow by 4 percent to $940 billion.
IATA also projects 2025 passenger revenue to reach $705 billion, with an additional $145 billion generated by ancillary services. Still, passenger yield is expected to fall 3.4 percent year over year, while unit revenue is expected to fall 2.5 percent.
"A trillion dollars is a lot—almost 1 percent of the global economy," IATA director general Willie Walsh said in a statement. "But remember that airlines carry $940 billion in costs, not to mention interest and taxes."
IATA also projects a "slight strengthening" for airline profitability, with ongoing cost and supply-chain challenges remaining headwinds. The group forecast net airline profits in 2025 to reach $36.6 billion, up from the projected $31.5 billion for 2024. Average net profit per passenger is estimated to be $7, which is below the high of $7.90 in 2023, but up from the $6.40 projected for 2024.
The association projects 2025 airline operating profit of $67.5 billion for a net operating margin of 6.7 percent, up from the 6.4 percent estimated for 2024.
Walsh added that the industry's profitability "will be hard-earned as airlines take advantage of lower oil prices while keeping load factors above 83 percent, tightly controlling costs, investing in decarbonization, and managing the return to more normal growth levels following the extraordinary pandemic recovery," he said. "All these efforts will help to mitigate several drags on profitability which are outside of airlines' control, namely persistent supply-chain challenges, infrastructure deficiencies, onerous regulation and a rising tax burden."
IATA projects average 2025 airfare, including ancillaries, of $380, 1.8 percent lower than in 2024. IATA estimates that when adjusted for inflation, that represents a 44 percent drop compared with 2014 fares, "indicating that significant value is being passed to consumers in the industry's continued effort to improve efficiency."
Passenger demand is projected to grow 8 percent year over year, ahead of a 7.1 percent expected increase in capacity for 2025, according to IATA. The group projects passenger numbers in 2025 to reach 5.2 billion, a 6.7 percent increase year over year and the first time that the number of passengers would exceed 5 billion.
Regional Outlook
IATA projects 2025 net profit for North America of $13.8 billion, up from the $11.8 billion estimated for 2024. Air traffic demand is projected to grow 3 percent with capacity up 2.8 percent. The region generates "the largest absolute profit, albeit at lower levels than prior to the pandemic," according to IATA.
Europe's outlook for 2025 includes a projection of $11.9 billion in net profit, up from the $10 billion estimated for 2024. Demand is forecast to increase 7 percent with capacity estimated to increase 6.5 percent. The region faces "numerous challenges," including rising wages, fleet groundings, noise-related flight restrictions, increasing airport charges, "onerous" regulations and high national taxes.
Asia-Pacific is the largest market by demand, with China accounting for more than 40 percent of the region's traffic, according to IATA. In 2024, demand grew by an estimated 18.6 percent year over year, while demand in 2025 is projected to grow 11.7 percent. Capacity in 2025 is estimated to increase 10.8 percent. IATA projects a 2025 net profit for the region of $3.6 billion, up from the estimated $3.2 billion for 2024.
Net profit in 2025 for Latin America is projected to increase to $1.3 billion from $1 billion in 2024, according to IATA. Demand is estimated to increase 8 percent while capacity will keep pace with a 7.9 percent increase.
Middle East airlines "have benefitted from the region's robust economic performance, strategic infrastructure investments, supportive government policies, and from the closure of Russian airspace to European, American and some Asia airlines," according to IATA. The group projects 2025 net profit to increase to $5.9 billion from $5.3 billion in 2024, with demand up 9.5 percent and capacity up 9.2 percent.
IATA projects Africa's 2025 net profit to be $200 million, up from a 2024 estimate of $100 million. Carriers "face high operational costs and a low propensity for air travel expenditure in many of their home markets," according to IATA. Still, demand is projected to increase 8 percent year over year, with capacity estimated to be up 7.7 percent.
Potential Risks
IATA noted "strong geopolitical and economic uncertainties" that fall into three categories. The first is conflict, with worsening prospects should the wars in Europe and the Middle East spread. On the other hand, achieving peace in either is likely to have a positive effect, particularly in the case of the Russia-Ukraine war.
The incoming Trump administration brings "several significant uncertainties," according to IATA. Tariffs and trade wars would likely dampen demand for air cargo and potentially affect business travel. If these policies "rekindle inflation with higher interest rates as a policy response," the negative effects on demand "would be exacerbated." Conversely, should there be a business-friendly stance, "gains from deregulation and business simplification could be significant." IATA also noted uncertainty regarding government support for aviation's decarbonization efforts in the United States.
Lower oil prices are a key driver of IATA's outlook for 2025. Should they not materialize, however, the projections "could change significantly," considering the industry's "thin margins."
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