Airline industry scales back profit outlook
NEW YORK: The global airline industry stands to earn a collective US$36bil this year, a downward revision from the most recent prediction issued in December amid growing trade tensions and a drop in consumer confidence, the leading aviation association says.
The new forecast aligns with the US$ 36.6bil profit target issued for 2025 at the end of last year, the International Air Transport Association (IATA) said in a statement yesterday.
The figure translates into a profit margin of 3.7% on industry revenue of about US$979bil, which was also revised from the December goal.
'The first half of 2025 has brought significant uncertainties to global markets,' IATA director general Willie Walsh said in the release.
At the same time, the industry is benefitting from lower oil prices, which are in turn trimming airlines' fuel bills – the biggest single expense for carriers.
Airlines, particularly in the United States, have been forced to scale back their outlooks recently after price-sensitive passengers reconsidered their travel plans and some high-profile accidents discouraged bookings.
In March, Delta Air Lines Inc slashed its first quarter profit guidance and also reduced its outlook for revenue growth and operating margin.
That was a sharp reversal from the start of the year, when it saw a steady demand environment.
Walsh said that he remains optimistic, considering some of the events restraining growth are 'short-term in nature'.
'It won't have a long-term impact on the growth in the industry,' Walsh said. 'Demand for aviation, demand for flying, will remain strong.'
Last year, the industry earned a collective US$32.4bil, on a margin of 3.4%. Walsh said profitability remains 'wafer thin', highlighting how easily airlines can see their targets dissolve because of economic headwinds and changing consumer sentiment.
The North American market is expected to see the highest total profit contribution at US$12.7bil, followed by Europe.
The Middle East, home to giant carriers like Emirates and Qatar Airways, will account for the highest profit per passenger, IATA said, though capacity there is being limited by aircraft delivery delays.
Airline executives have gathered in New Delhi this week for the IATA's annual meeting to discuss the state of the sector.
India has become a key market for future growth as a rising middle class takes up flying, putting the country of over 1.4 billion people on the move.
That's drawing more global airlines to the region, with Delta chief executive officer Ed Bastian calling a code-sharing agreement announced on the eve of the meeting with local discount specialist IndiGo 'the next step of our growth strategy'.
Bastian said in a separate interview that he expects the latter part of the year to show improved demand after what he said was a 'choppy' start to 2025 amid trade tensions and hesitancy, especially among leisure travellers in the United States to book flights. — Bloomberg
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