Despite the ongoing global cost and supply chain disruptions, the International Air Transport Association (IATA) believes that the airlines industry will record a net profit of US$36.6 billion (RM161.8 billion), representing a 3.6% net profit margin.
At the same time, total industry revenues are expected to be US$1.01 trillion (RM4.46 trillion), an increase of 4.4% from 2024.
IATA director-general Willie Walsh said the improvement will be hard earned as airlines take advantage of lower oil prices while keeping load factors above 83%, tightly controlling costs, investing in decarbonisation 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, he said.
The operating profit is expected to be US$67.5 billion (RM298.35 billion) for a net operating margin of 6.7%, improved from 6.4% expected in 2024.
The return on invested capital (ROIC) for the global industry is expected to be 6.8% in 2025 compared to 2024’s 6.6%, with the strongest ROIC for airlines in Europe, the Middle East and Latin America.
Furthermore, IATA states that all regions are expected to show improved financial performances and deliver a collective net profit in 2025 compared to 2024, forecasted to be at US$3.6 billion (RM15.91 billion) and representing 1.4% of net profit margin.
IATA noted that Asia Pacific is the largest market in terms of revenue passenger kilometres (RPKs) with China accounting for over 40% of the region’s traffic.
In 2024, RPKs grew by 18.6%, fuelled in part by market stimulus from visa requirement relaxations for entry to several countries including China Vietnam, Malaysian and Thailand.
“Chinese carriers reported net losses in the first half of 2024 as a consequence of supply chain issues, oversupply in the domestic market and a limitation of 100 weekly frequencies from China to the US.
“Asia Pacific has also experienced the sharpest drop in yields in 2024, thanks to strong demand and increasing load factors. A slight improvement in profitability is likely in 2025,” AITA said.
Next year, it has been projected that global passenger traffic will grow 6.2% to exceed the five billion mark for the first time to 5.2 billion.
Furthermore, IATA expects severe supply chain issues to continue to impact airline performance into 2025, raising costs and limiting growth.
Aircraft deliveries in 2025 are forecast to rise to 1,802, compared to estimated deliveries in 2024 of 1,254 aircraft. This was well below earlier expectations for 2,293 deliveries with further downward revisions in 2025.
“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. 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,” said Walsh.
He added that the airlines need to be fixing their battered post-pandemic balance sheet, but progress is effectively capped by supply chain issues that manufacturers need to resolve.
Walsh said persistent supply chain issues are at least partially responsible for two negative developments, namely, stagnant fuel efficiency and soaring aircraft leasing costs.
He pointed out that while the aviation sector is united in its commitment to achieving net zero carbon emissions by 2050, the practicality of actually getting there, airlines are left bearing the biggest burden.
“The supply chain issues are a case in point. Manufacturers are letting down their airline customers and that is having a direct impact of slowing down airlines’ efforts to limit their carbon emissions.
“If the aircraft and engine manufacturers could sort out their issues and keep their promises, we’d have a more fuel-efficient fleet in the air,” he opined.
