4 days ago
Trade tensions, political uncertainty dim air travel outlook; record traveller forecast trimmed
Iata said airline net profits are projected to be US$36 billion (S$46.4 billion) in 2025, up from US$32.4 billion in 2024. PHOTO: ST FILE
NEW DELHI – Trade tensions and a decline in consumer confidence amid political and economic uncertainty have dented projected demand for air travel.
While airlines are expected to carry a record 4.99 billion travellers in 2025 – 4 per cent more than in 2024 – this latest forecast falls short of the 5.22 billion projected by the International Airport Transport Association (Iata) in December 2024.
Still, airlines are expected to turn in higher profits despite the headwinds.
Iata, a global trade body represent ing more than 350 carriers, said airline net profits are projected to be US$36 billion (S$46.4 billion) in 2025, up from US$32.4 billion in 2024 but slightly below the earlier forecast of US$36.6 billion for 202 5.
Net profit margins are also expected to rise to 3.7 per cent in 2025, up from 3.4 per cent in 2024.
Iata director-general Willie Walsh said 2025 will be a better year for airlines, even with the significant uncertainties in global markets in the first half of the year.
'Considering the headwinds, it's a strong result that demonstrates the resilience that airlines have worked hard to fortify,' he added.
The Asia-Pacific is the largest air travel market, Iata said, and passenger demand in the region is expected to be strong given the relaxation in visa requirements in several Asian countries such as China, Vietnam, Malaysia and Thailand.
However, the association noted economic challenges as gross domestic product forecasts for the region, especially for China, have been revised down wards .
Mr Walsh said the biggest positive driver on the profitability front has been the 13 per cent fall in jet fuel prices.
Strong employment and moderating inflation projections are also expected to keep air travel demand growing, even if not as fast as previously projected.
An Iata poll in April found that a large majority of travellers expect to travel as much or more in the next 12 months. While 73 per cent of respondents expect to be personally affect ed by trade tensions, 65 per cent said this will not change their travel habits. Of the business travellers polled, 68 per cent expect to travel more to visit customers amid the trade tensions.
Iata said passenger yields – a measure of how much airlines earn per passenger and a proxy for air fares – will fall 4 per cent in 2025, reflecting lower oil prices and strong competition within the industry.
The average return airfare in 2025 is expected to be US$374, down from an earlier projection of US$380 and below the 2024 average of US$387.
Supply chain issues that have plagued the airline industry since the pandemic are expected to persist in 2025, and could continue until the end of the decade, Iata said.
It pointed to the backlog of aircraft deliveries, which have exceeded 17,000, implying a wait time of 14 years.
This has had a negative impact on airlines, driving up aircraft leasing costs and reducing the efficiency of fleet usage.
Iata also warned that moves to remove aircraft from tariff exemptions could aggravate supply chain constraints and production limits.
Said Mr Walsh: 'Manufacturers continue to let their airline customers down. Every airline is frustrated that these problems have persisted so long.'
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