Middle East airlines to lead global profit margins at 8.7% in 2025, IATA says

Arab News

2 days ago

RIYADH: Middle East airlines are forecast to post the world's highest net profit margin in 2025 of 8.7 percent, outpacing global peers, according to the latest industry report.
The forecast, released by the International Air Transport Association during its 81st Annual General Meeting in New Delhi, also projects that airlines operating in the Middle East will generate a net profit of $6.2 billion this year — slightly up from $6.1 billion in 2024. The region is also expected to earn $27.20 per passenger.
Globally, airlines are projected to record a net profit of $36 billion, with total industry revenue reaching $979 billion — below IATA's earlier $1 trillion estimate, due in part to macroeconomic uncertainties and supply constraints.
The growth of the aviation sector in the Middle East reflects broader regional expansion, as countries such as Saudi Arabia and the UAE continue to bolster the industry as part of their economic diversification efforts.
In its report, IATA stated: 'The Middle East will generate the highest net profit per passenger among the regions. Robust economic performance is supporting strong air travel demand, both for business and leisure travel.'
It added: 'However, with delays in aircraft delivery, the region will see limitations in capacity as airlines embark on retrofit projects to modernize their fleet, hence limiting growth.'
According to IATA, revenue per passenger in 2025 is expected to reach $11.10 in North America, followed by $8.90 in Europe, $3.40 in Latin America, $2.60 in Asia Pacific, and $1.30 in Africa.
Global outlook
While airlines globally are expected to earn a collective $36 billion in profit in 2025, up from $32.4 billion in 2024, the figure is slightly below the $36.6 billion projected in December. The average net profit per passenger remains modest at $7.20, according to IATA.
IATA Director General Willie Walsh said the first half of 2025 has brought notable uncertainty to global markets. Still, he noted, airline performance is expected to surpass 2024 levels, though it will fall slightly short of earlier forecasts.
'The biggest positive driver is the price of jet fuel which has fallen 13 percent compared with 2024 and 1 percent below previous estimates,' he said.
Walsh added: 'Moreover, we anticipate airlines flying more people and more cargo in 2025 than they did in 2024, even if previous demand projections have been dented by trade tensions and falls in consumer confidence.'
He noted that considering the headwinds, this is a strong result that 'demonstrates the resilience that airlines have worked hard to fortify.'
Operating profit for global airlines is expected to reach $66 billion in 2025, up from $61.9 billion the previous year. Total expenses are projected at $913 billion in 2025, marking a 1 percent increase from 2024.
'Our profitability is not commensurate to the enormous value that we create at the heart of a value chain supporting 3.9 percent of global GDP and providing and supporting jobs for 86.5 million people,' said Walsh.
Passenger revenue in 2025 is expected to increase by 1.6 percent year on year to reach an all-time high of $693 billion.
Passenger growth, measured in revenue passenger km, is projected at 5.8 percent — a normalization following the double-digit growth during the pandemic recovery.
Cargo revenues are expected to decline by 4.7 percent to $142 billion in 2025, driven by sluggish global economic growth and trade-dampening protectionist measures, including tariffs.
Air cargo growth is expected to slow to 0.7 percent in 2025 from 11.3 percent in 2024. Cargo yield is also projected to decline by 5.2 percent, reflecting slower demand growth and lower oil prices.
Fleet and backlog issue
The IATA director general criticized aircraft manufacturers for long delivery backlogs, noting that more than 17,000 aircraft are on order, with wait times of up to 14 years, stalling growth opportunities across regions.
'The number of deliveries scheduled for 2025 is 26 percent less than what was promised a year ago,' said Walsh.
He warned that the backlog will negatively impact revenues as demand remains unmet, while scarcity drives up maintenance and leasing costs.
'It's just not acceptable that manufacturers estimate it could take until the end of the decade to sort this mess out,' said Walsh.
Walsh also highlighted recent infrastructure advancements, including the opening of new secondary airports in New Delhi and Mumbai, and the phased launch of the world's largest airport in Dubai.
'Governments around the world are building a competitive future for aviation because they want aviation to contribute even more to their societies and economies,' added Walsh.
Sustainability and SAF
Walsh also emphasized the importance of sustainability in aviation, urging the sector to leverage all available decarbonization tools.
He called for global cooperation to advance decarbonization efforts.
IATA reported that sustainable aviation fuel production is expected to double in 2025 to 2 million tonnes — still only 0.7 percent of total industry fuel usage.
The average cost of SAF in 2024 was 3.1 times higher than jet fuel, adding $1.6 billion in costs.
In 2025, SAF is expected to cost 4.2 times more than jet fuel, primarily due to 'compliance fees' levied by European fuel suppliers to hedge against the cost of meeting a 2 percent SAF mandate in jet fuel supplies.
'The behavior of fuel suppliers in fulfilling the SAF mandates is an outrage. The cost of achieving net-zero carbon emissions by 2050 is estimated to be an enormous $4.7 trillion,' said Walsh.
He added: 'Fuel suppliers must stop profiteering on the limited SAF supplies available and ramp up production to meet the legitimate needs of their customers.'
Walsh added that under the Carbon Offsetting and Reduction Scheme for International Aviation, airlines are expected to face a $1 billion cost in 2025.
Under CORSIA, operators must purchase and cancel emissions units to offset increases in CO2 emissions.
'CORSIA must be successful. It is a credible and verifiable system that requires carbon credits of only the highest standard, making its positive impact on climate unquestionable,' said Walsh.