Latest news with #airlineindustry
The National
a day ago
- Business
- The National
Airlines evaluate legal options over delayed jet deliveries as travel demand soars
The global airline industry is evaluating legal options over delayed aircraft deliveries that have constrained capacity and hampered growth plans, the head of the International Air Transport Association said. However, the industry prefers to work collaboratively with manufacturers to address supply chain problems, Willie Walsh, director general of Iata, said at a media briefing in New Delhi on Monday. 'We continue to evaluate whether there is any reason for us to look at potential legal opportunities, so we haven't done anything, but we continue to evaluate that as a potential option,' he said. 'Our preference is to work collaboratively with OEMs and all of the suppliers to try and bring greater clarity to the problem and work together to solve [it].' The manufacturing sector is 'failing badly' as a delivery backlog of 17,000 jets implies a 14-year wait between ordering and handover, Mr Walsh said. This hits airlines' revenue because some travel demand goes unmet and aircraft scarcity pushes up maintenance and leasing costs. 'It's just not acceptable that manufacturers estimate that it could take to the end of this decade to to sort this mess out,' he said at an opening speech of Iata's 81st annual meeting on Monday. 'Real solutions must come from manufacturers … the solution cannot come fast enough.' Iata represents 350 airlines comprising more than 80 per cent of global air traffic. Supply chain bottlenecks have limited airlines' growth, driving up plane leasing costs, increasing the average fleet age to 15 years (from 13 in 2015), cutting the fleet replacement rate to half the six per cent of 2020 and reducing the efficiency of fleet use. There are 1,692 aircraft expected to be delivered in 2025, and while this is the highest level since 2018, it is almost 26 per cent lower than estimates from a year ago. 'Further downward revisions are likely, given that supply chain issues are expected to persist in 2025 and possibly to the end of the decade,' Iata said in its annual report on Monday. Engine problems and a shortage of spare parts worsen the situation and have caused record-high groundings of certain aircraft types. The number of aircraft younger than 10 years in storage is currently more than 1,100, constituting 3.8 per cent of the total fleet, Mr Walsh said. Tim Clark, president of Emirates, said that the pandemic is no longer a viable excuse for supply chain problems. 'Covid was five years ago … you can only beat that drum for so long,' he said at a media briefing on Sunday. 'I'm pretty tired of the hearing the same hand-wringing that goes on: 'We're really sorry, you know it's the supply chain.' You are the supply chain, so what are you doing about it?' Airlines' increasing frustrations with jet delays come as the total number of travellers is forecast to reach a record high 4.99 billion in 2025, a 4 per cent annual rise, according to Iata. 'The rate of growth in the industry has slowed down as a result of the supply chain issues,' Mr Walsh said at the media briefing. Pieter Elbers, chief executive of Indigo, said that the limited number of suppliers means that whenever there is a 'choking' in the system, it affects all airlines to varying degrees. 'We're pretty much three years post-Covid and there's no end of sight yet,' he said. 'It's a missed opportunity in terms of addressing the market demand and especially some of the high-growth markets.' US tariffs and aircraft costs Airlines will also resist any efforts by manufacturers to pass on US tariffs as higher prices for aircraft, Mr Walsh said. 'Our desired position would be that aerospace, aircraft and aircraft engines be excluded from tariff regimes and that we return to the 1979 agreement where they are exempt,' he said. 'It is a global supply chain, it's functioning very well. Starting to unpick that by applying tariffs is going to be very complex.' Mr Walsh said there is no evidence yet of increases in aircraft prices due to tariffs but a number of key suppliers have indicated that this is something they are looking at. 'Obviously any development to increase the price of aircraft is going to be very much an unwelcome development by airlines and will be resisted by airlines,' Mr Walsh said. 'We will have to understand the justification behind any increase. We don't want to see any of the manufacturers using tariffs as an excuse or an opportunity to increase their prices to the industry.' Iata's chief economist Marie Owens Thomsen said the US tariffs measure will be a 'net negative economic policy' that will hurt the global trading system because supply chains are so interdependent. A single aircraft has more than 800 different suppliers from all over the world. 'If you start putting tariffs on this, the whole system breaks apart,' she said. 'These are like global arteries … if we have a problem with our arteries, we all understand intuitively that this will affect all of our organs and our overall performance. And it's the same when you mess with these supply chains and the global trading system.'
Bloomberg
a day ago
- Business
- Bloomberg
Korean Air Chairman Calls for Political Stability, Tariff Cuts
South Korea's next government should prioritize making a trade deal with Washington that shields the aviation industry from tariffs, the head of the country's largest airline said. Korean Air Lines Co. Chairman and Chief Executive Officer Cho Won-Tae, speaking before voters head to the polls on Tuesday to choose a new government, said he expects the outcome to lead to stability and predictable governance, no matter who wins.
Trade Arabia
2 days ago
- Business
- Trade Arabia
Mideast airlines to generate highest net profit
The global airline industry is showing improved profitability this year over 2024 and is resilient in the face of global economic and political shifts, the International Air Transport Association (IATA) updates said. 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. However, with delays in aircraft delivery, the region will see limitations in capacity as airlines embark on retrofit projects to modernise their fleet, hence limiting growth, said IATA. Highlights from the expected 2025 financial performance include: * Net profits at $36 billion, is set to improve from the $32.4 billion earned in 2024, but slightly down on the previously projected $36.6 billion (December 2024). • Net profit margin at 3.7% will improve from the 3.4% earned in 2024 and the previously projected 3.6%. • Return on invested capital at 6.7%, improved from the 6.6% earned in 2024 and largely unchanged from previous projections. • Operating profits at $66.0 billion, improved from an estimated $61.9 billion in 2024, but down from the previously projected $67.5 billion. • Total revenues at a record high of $979 billion (+1.3% on 2024, but below the $1 trillion previously projected). • Total expenses at $913 billion (+1.0% on 2024, but below the previously projected $940 billion). • Total traveller numbers reaching a record high 4.99 billion (+4% on 2024, but below the previously projected 5.22 billion). • Total air cargo volumes reaching 69 million tonnes (+0.6% on 2024, but below the previously projected 72.5 million tonnes). 'The first half of 2025 has brought significant uncertainties to global markets. Nonetheless, by many measures including net profits, it will still be a better year for airlines than 2024, although slightly below our previous projections. The biggest positive driver is the price of jet fuel which has fallen 13% compared with 2024 and 1% below previous estimates. 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. The result is an improvement of net margins from 3.4% in 2024 to 3.7% in 2025. That's still about half the average profitability across all industries. But considering the headwinds, it's a strong result that demonstrates the resilience that airlines have worked hard to fortify,' said Willie Walsh, IATA's Director General. Perspective 'Perspective is critical to put into context such large industry-wide aggregate figures. Earning a $36 billion profit is significant. But that equates to just $7.20 per passenger per segment. It's still a thin buffer and any new tax, increase in airport or navigation charge, demand shock or costly regulation will quickly put the industry's resilience to the test. Policymakers who rely on airlines as the core of a value chain that employs 86.5 million people and supports 3.9% of global economic activity, must keep this clearly in focus,' said Walsh. Outlook Drivers Gross Domestic Product (GDP) is the traditional driver of airline economics. However, although global GDP growth is expected to fall from 3.3% in 2024 to 2.5% in 2025, airline profitability is expected to improve. This is largely on the back of falling oil prices. Meanwhile, continued strong employment and moderating inflation projections are expected to keep demand growing, even if not as fast as previously projected. Efficiency is another significant driver of the outlook. Passenger load factors are expected to reach an all-time high in 2025 with a full-year average of 84.0%, as fleet expansion and modernization remains challenging amid supply chain failures in the aerospace sector. Overall, total revenues are expected to grow by 1.3%, outpacing a 1.0% increase in total expenses, shoring up industry profitability. Industry revenues are expected to reach a historic high of $979 billion in 2025 (+1.3% on 2024). Passenger Revenues Passenger revenues are expected to reach $693 billion in 2025 (+1.6% on 2024), an all-time high. This will be bolstered by an additional $144 billion in ancillary revenues (+6.7% on 2024). Passenger growth (measured in Revenue Passenger Kilometers/RPK) is expected to be 5.8%—a significant normalization after the exceptional double-digit growth of the pandemic recovery. It is expected that passenger yields will fall by 4.0% compared with 2024. This is largely reflective of the impact of lower oil prices and strong industry competition. This will continue the trend of travelers benefiting from ever-more affordable air travel. The real average return airfare (in 2024 US dollars) is expected to be $374 in 2025. This is 40% below 2014 levels. IATA's April 2025 polling data supports projections for demand growth: • Some 40% of respondents expect to travel more over the next 12 months than they did in the previous 12-month period. The majority (53%) said that they expect to travel as much as they did in the previous 12 months. Only 6% reported that they expect to travel less. • Some 47% of respondents expect to spend more on travel over the next 12 months than they did in the previous 12 months. An almost equal proportion (45%) expect to spend the same on travel over the next 12 months while only 8% expect to spend less. • Although 85% expected trade tensions to impact the economy in which they reside and 73% expect to be personally impacted, 68% of business travelers (50% of those polled) expected increased business travel amid trade tensions to visit customers, and 65% said trade tensions would have no impact on their travel habits. Cargo Revenues Cargo revenues are expected to be $142 billion in 2025 (-4.7% on 2024). This is primarily based on the expected impact of reduced GDP growth largely influenced by trade-dampening protectionist measures, including tariffs. As a result, air cargo growth is expected to slow to 0.7% in 2025 (from 11.3% in 2024). The cargo yield is also expected to reduce by 5.2%, reflecting a combination of slower demand growth and lower oil prices. Although significant uncertainty remains on how trade tensions will evolve over the year, as of April cargo demand was holding up well with a 5.8% year-on-year increase. Expenses Industry expenses are expected to grow to $913 billion in 2025 (+1.0% on 2024). Jet fuel is expected to average $86/barrel in 2025 (well below the $99 average in 2024), translating into a total fuel bill of $236 billion, accounting for 25.8% of all operating costs. This is $25 billion lower than the $261 billion in 2024. Recent financial data show minimal fuel hedging activity over the past year, indicating that airlines will generally benefit from the reduced fuel cost. It is not expected that fuel will be impacted by trade tensions. Sustainable Aviation Fuel (SAF) production is expected to grow to two million tonnes (Mt) in 2025, accounting for just 0.7% of airline fuel use. SAF production will double from the 1 Mt produced in 2024 (all of which was purchased by airlines), but production needs an exponential expansion to meet the demands of the industry's commitment to net zero carbon emissions by 2050. IATA estimates that the average cost of SAF in 2024 was 3.1 times that of jet fuel, for a total additional cost of $1.6 billion. In 2025, the global average cost for SAF is expected to be 4.2 times that of jet fuel. This extra cost is largely the result of SAF 'compliance fees' being levied by European fuel suppliers to hedge their potential costs as a result of European SAF mandates to include 2% SAF in the jet fuel supply. '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. Fuel suppliers must stop profiteering on the limited SAF supplies available and ramp up production to meet the legitimate needs of their customers,' said Walsh. The cost of the Carbon Offsetting Reduction Scheme for International Airlines (CORSIA) to airlines is expected to reach $1 billion in 2025. The market for CORSIA credits will grow, but Guyana is the only country to have issued certificates for the high-quality credits that the scheme requires. Fleet/Supply Chain The aircraft backlog exceeds 17,000 (sharply up from the 10,000-11,000 pre-pandemic), with an implied wait time of 14 years. Should states exit from a multilateral agreement exempting aircraft from tariffs, supply chain constraints and production limitations could be further aggravated. Supply chain issues have had significant negative impacts on airlines: driving-up leasing costs, increasing the average fleet age to 15 years (from 13 in 2015), cutting the fleet replacement rate to half the 5-6% of 2020, and reducing the efficiency of fleet utilization (using larger aircraft than needed on some routes, for example). In 2025, 1,692 aircraft are expected to be delivered. Although this would mark the highest level since 2018, it is almost 26% lower than year-ago estimates. Further downward revisions are likely, given that supply chain issues are expected to persist in 2025 and possibly to the end of the decade. Engine problems and a shortage of spare parts exacerbate the situation and have caused record-high groundings of certain aircraft types. The number of aircraft younger than 10 years in storage is currently more than 1,100, constituting 3.8% of the total fleet compared with 1.3% between 2015 and 2018. Nearly 70% of these grounded aircraft are equipped with PW1000G engines. 'Manufacturers continue to let their airline customers down. Every airline is frustrated that these problems have persisted so long. And indications that it could take until the end of the decade to fix them are off-the-chart unacceptable!' said Walsh. Risks With ongoing geopolitical and economic uncertainties, the most significant risks to the industry outlook include: • Conflict: The resolution of conflicts such as the Russia-Ukraine war would have a benefit for airlines in reconnecting de-linked economies and reopening airspace. Conversely, any expansion of military activity could have a dampening effect. • Trade tensions: Tariffs and prolonged trade wars dampen demand for air cargo and potentially travel. Additionally, the uncertainty over how the Trump Administration's trade policies will evolve could hold back critical business decisions that drive economic activity, and with it the demand for air cargo and business travel. • Fragmentation: Global standards have always been critical for aviation. Fragmentation of global standards or weakening of multilateral institutions and agreements could bring additional costs to airlines with a more complex or unstable regulatory environment. This includes the evolution of policies on climate, trade, facilitation and a myriad of other matters impacting airline strategic decision-making and operations. • Oil prices: Oil prices are a major driver of airline profitability. The complex array of factors impacting oil prices (including economic growth projections, the amount of extraction activity undertaken, policies on decarbonisation, sanctions, availability of refining capacity, and transport blockages) can produce quick shifts in pricing volatility with significant impact on airline financial prospects. Regional Roundup
Skift
2 days ago
- Business
- Skift
Summer in America: A Q3 U.S. Preview
Skift Take Welcome to the new U.S. airline industry. United is now friends with JetBlue. Southwest will now charge you for bags. United and American are both investing in Brazil. Delta is investing in Canada. But is this a new and improved U.S. airline industry? That will likely depend on what wins the race to the bottom: Demand, supply, or fuel costs? All three are declining, as we discuss in this week's feature story.
Bloomberg
2 days ago
- Business
- Bloomberg
Airline Industry Scales Back Profit Outlook Amid Trade Tensions
The global airline industry stands to earn a collective $36 billion this year, a downward revision from the most recent prediction issued in December amid growing trade tensions and a drop in consumer confidence, the leading aviation association said. The new forecast compares with the $36.6 billion profit target issued for 2025 at the end of last year, the International Air Transport Association said in a statement Monday. The figure translates into a profit margin of 3.7% on industry revenue of about $979 billion, which was also revised from the December goal.
