IATA Predicts a Mix Bag For Global Airlines Profitability of airlines is set to improve in 2025, however, growth will be limited due to supply chain issues
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The International Air Transport Association (IATA) in its outlook for 2025, highlighted the broad benefits of growing connectivity. The most recent estimates show that airline employment is expected to grow to 3.3 million in 2025. Airlines are the core of a global aviation value chain that employs 86.5 million people and generates $4.1 trillion in economic impact, accounting for 3.9 per cent of global GDP (2023 figures). Profitability of airlines is set to improve in 2025, however, growth will be limited due to supply chain issues.
"Looking at 2025, for the first time, traveler numbers will exceed five billion and the number of flights will reach 40 million. This growth means that aviation connectivity will be creating and supporting jobs across the global economy. The most obvious are the hospitality and retail sectors which will gear up to meet the needs of a growing number of customers. But almost every business benefits from the connectivity that air transport provides, making it easier to meet customers, receive supplies, or transport products. On top of this, growth in aviation also contributes to achieving almost all the UN's Sustainable Development Goals (SDGs)," said Willie Walsh, IATA's Director General.
Overall financial performance is expected to improve in 2025 on the back of lower jet fuel prices and efficiency gains. Further increases are being held back by forced capacity discipline resulting from unresolved supply chain issues. This is limiting growth opportunities and driving up several cost areas, including aircraft leasing and maintenance. Net profitability will also be squeezed as airlines are expected to exhaust their tax losses carry forwards from the pandemic era, leading to an increase in tax rates in 2025.
"We're expecting airlines to deliver a global profit of $36.6 billion in 2025. This will be hard-earned as airlines take advantage of lower oil prices while keeping load factors above 83 per cent, tightly controlling costs, investing in decarbonization, and managing the return to more normal growth levels following the extraordinary pandemic recovery. 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," said Walsh.
Although financials look strong, IATA expects severe supply chain issues to continue to impact airline performance into 2025, raising costs and limiting growth.
Explaining this, the general said that supply chain issues are frustrating every airline with a triple whammy on revenues, costs, and environmental performance. "Load factors are at record highs and there is no doubt that if we had more aircraft they could be profitably deployed, so our revenues are being compromised. Meanwhile, the aging fleet that airlines are using has higher maintenance costs, burns more fuel, and takes more capital to keep it flying. And, on top of this, leasing rates have risen more than interest rates as competition among airlines intensified the scramble to find every way possible to expand capacity. This is a time when airlines need to be fixing their battered post-pandemic balance sheets, but progress is effectively capped by supply chain issues that manufacturers need to resolve," he noted.
