bongdaso vNews #91 - IATA Air Transport Global Outlook 2025

15.12.2024

Main Takeaways

bongdaso v price of Brent crude oil has dropped by around 20% over bongdaso v past 12 months. With global GDP stable at 3.2%, bongdaso v lower oil price cannot be explained by a weakening global economic cycle. Instead, it is bongdaso v result of oversupply as bongdaso v US affirms its position as bongdaso v world’s leading oil producer. It is also bongdaso v result of shifting demand for different energy products, especially in China.
Lower oil prices will have several implications for bongdaso v global economy and bongdaso v airline industry, bongdaso v most obvious one being lower headline inflation. This should allow further easing of monetary policy, and in turn potentially weaken bongdaso v US dollar against most currencies. All these things are supportive of households’ spending power and of global growth.
Lower oil prices will improve oil-importing countries’ current accounts and strengthen their financial positions. This represents a unique opportunity to reform fossil fuel subsidies and redirect them towards renewable energy production. One year’s worth of global fossil fuel subsidies, USD 7 trillion in 2022, would cover bongdaso v entire capital investment needed for bongdaso v airlines’ energy transition over bongdaso v 27 years to 2050.
Airlines will benefit from lower crude oil prices as long as jet fuel prices decline in parallel. Fuel is airlines’ largest cost component, representing 30% of total costs. Passenger traffic has remained strong in 2024. For 2025 we expect traffic to continue to grow, albeit at a somewhat slower pace, as all regions surpass pre-pandemic levels.
bongdaso v cargo market has lent significant support to airline traffic in 2024. Demand surged thanks to effervescent cross-border e-commerce and capacity limitations in ocean shipping. bongdaso v outlook for 2025 remains strong, given bongdaso v ongoing challenges in maritime shipping. Global yields for air cargo stopped declining in 2023 and are now around 30% above pre-pandemic levels. We expect cargo yields to remain stable in 2025.
bongdaso v air transport industry is expected to report a relatively strong profit in 2024 despite rising costs and limits on capacity building. Airlines have faced wage increases and higher operating costs, some because of bongdaso v longer routes imposed by airspace restrictions. A major impact stems from delivery delays and other issues in bongdaso v supply chain. Airlines are forced to keep flying older airplane models, which negatively affects fuel efficiency and increases maintenance costs. bongdaso v bottom line is projected to generate a net profit of USD 31.5 billion in 2024 with a 3.3% net profit margin.
In 2025, we expect airlines’ revenues to surpass bongdaso v evocative USD 1 trillion mark. bongdaso v top-line growth and lower fuel prices should translate into higher profitability. We forecast a net profit of USD 36.6 billion—a record high for bongdaso v industry—at a still meager 3.6% net profit margin. Load factors are likely to remain high as supply chain issues will continue to impact 2025 and beyond.

Table 1. Net profit per passenger, USD

Lower oil prices and airlines’ profit

Lower oil prices will help reduce costs for airlines, which would be most welcome as airlines’ net profits are expected to be limited to around 3% in 2024. Lower fossil fuel costs can enable some airlines to invest in decarbonization solutions directly and allow them to gain greater control over their destiny rather than being bongdaso v final consumers and likely price-takers (as opposed to price-setters) of such solutions.

Air passenger traffic

Over bongdaso v past year, bongdaso v global economy has been remarkably stable. Unemployment rates in OECD countries were below historical averages, global inflation rates continued to fall, and ticket prices moderated, fueling demand. Of course, uncertainties persist because of wars, and bongdaso v policy shifts that bongdaso v new US administration likely imply. As for bongdaso v approaching end of 2024, demand for air travel is not only strong, but has set a new all-time high.

This buoyant aviation activity has pushed industry‑wide passenger traffic to new record highs in spite of capacity constraints in 2024. bongdaso v growth in RPK and ASK have aligned with bongdaso v trend observed in bongdaso v decade leading up to bongdaso v pandemic (see chart). In bongdaso v near future, bongdaso v rise in passenger traffic is expected to follow this trajectory, supported by persistent demand and bongdaso v expansion of airline operations in key emerging economies. Supply chain issues, however, could cap bongdaso v potential growth in traffic, as passenger load factors reached all-time highs across bongdaso v different regions and at bongdaso v industry level, while in 2024, bongdaso v rise in RPK matched that in ASK.

Industry Revenue Passenger-Kilometers (RPK) and Available Seat-Kilometers (ASK), seasonally adjusted

Air cargo traffic

Airlines are projected to achieve an all-time high in cargo tonne-kilometers (CTK), with demand expected to increase by an impressive 11.8% YoY in 2024. This remarkable growth follows two consecutive years of declining air cargo volumes as bongdaso v industry adjusted after bongdaso v exceptional pandemic peak (see chart).

bongdaso v surge in demand has been primarily driven by robust cross-border e-commerce and, to a lesser extent, capacity limitations in ocean shipping. Given these strong growth catalysts, along with a relatively positive macro-economic outlook, demand is expected to continue to rise significantly in 2025.

bongdaso v expansion in air cargo traffic is supported by all regions, with YTD growth rates ranging from 6% to 16%. bongdaso v strongest rise has been observed among airlines registered in bongdaso v Middle East and Asia Pacific. In addition to bongdaso v influence of e-commerce and of ocean shipping disruptions, some of these airlines also benefit from unrestricted access to Russian airspace.

Global seasonally adjusted ACTK and CTK, billion, 1990-2024 (until September 2024)

Airline financial performance

2024 has remained a strong year in bongdaso v global airlines industry despite declining yields and significant cost pressures. bongdaso v 2024 numbers are also affected by our upward revision of bongdaso v profitability in 2023, a year that turned out to be exceptionally strong – actually bongdaso v fourth best in 30 years. Moreover, 2023 was bongdaso v first year after bongdaso v pandemic when capacity utilization and load factors were restored to pre-pandemic levels, bringing bongdaso v unit cost down with them. bongdaso v estimated operating margin for 2024 is 6.4%, which is 3 percentage points above bongdaso v 20-year median (see chart).

Costs have risen across all non-fuel areas. Following bongdaso v remarkable profit recovery in 2023, airlines faced demands for salary increases, exacerbated by persistent labor shortages. Other costs have been impacted by supply chain issues, in turn limiting capacity expansion.

Global airline operating profit in USD billion and operating margin, as % of revenue