Better and worse: unpacking IATA’s latest airline industry profit forecast

When IATA released its updated industry forecasts on 10 December, eyes were on whether 2024’s global net profit performance would be downgraded.

That downgrade was expected by some amid a year in which passenger yield pressures and rising costs sometimes weighed on earnings more acutely than expected, particularly in the second quarter.

Any downgrade would call into question IATA’s assertion in June that airline industry profitability would improve year on year in 2024, particularly given 2023 was a tough comparison point, when many airlines were still riding the crest of the post-Covid wave, with constrained capacity and pent-up demand driving yields to artificially high levels.

As ever with forecasts, the outcome is far from straightforward, and some important details are unchanged after IATA’s latest revision.

Airline margins, for example, are thin under all scenarios and, as a result, vulnerable to tipping into negative territory.

“The buffer between profit and loss, even in the good year that we are expecting of 2025, is just $7 per passenger,” says IATA director general Willie Walsh. “With margins that thin, airlines must continue to watch every cost and insist on similar efficiency across the supply chain.”

At the same time, all regions are expected to achieve aggregate net profits this year and next.

But thanks in part to the influence of falling oil prices and a tighter crack spread, alongside a quiet revision to 2023’s figures, those calling IATA’s forecasts into question have been proven both right and wrong.

So, how does IATA assess the industry’s financial health at the end of 2024 and heading into 2025?

Looking at 2024 in isolation, concerns about the industry’s full-year profitably being downgraded are likely to have been unjustified. Its figures for this year remain estimates, but IATA has in fact upgraded its net profit forecast for 2024 to $31.5 billion, from $30.5 billion in June.

That comes amid a Brent crude price that has stabilised in the $70-75/barrel range in recent months, just as the crack spread – the difference between crude and jet fuel prices – has plunged from inflated levels during the Covid recovery back down to something more like the historical trend.

With jet fuel prices lower than expected and aircraft still operating with load factors at or near historical highs, due in part to strong passenger demand and capacity constraints, concerns about cost pressures have abated to some extent and profitability has been supported, even with some passenger yield softness.

Also helping that profitability is a small uplift from higher cargo yields and demand this year. More broadly, rising global GDP, falling inflation and still-low unemployment levels are also supporting airline earnings.

But that is not where the 2024 story ends.

Crucially, IATA was, in June, projecting that 2024’s profit would exceed 2023’s, on the basis that the latter would be around $27.4 billion.

But as it turns out, 2023’s net profit actually came in at $35.2 billion, IATA’s latest data shows, meaning that even with its upgrade, the global airline industry’s 2024’s net profit performance is on course to be worse year on year.

That analysis chimes with Airline Business’s own data, which shows our benchmark airlines trailing their 2023 net profit performance by around $5 billion at the nine-month stage.

Ultimately, those who felt 2024’s performance was lagging 2023’s are likely to be proven right, but not because the former was being overestimated.

Rather than describing that slightly complex narrative, IATA chose instead to focus heavily on its 2025 projections in its updated forecast, highlighting expectations that the industry net profit will be ahead of both 2023 and 2024, at $36.6 billion.

For that 2025 profit to be realised, however, IATA notes that a lot rests on the favourable oil price and crack spread enduring into next year.

“Lower oil prices and resulting fuel costs are a major driver of improved prospects for airlines in 2025,” it states. “Should these not materialise for any reason and considering the industry’s thin margins, the outlook could change significantly.”

Those thin margins are projected to be 3.3% in 2024 and 3.6% in 2025.

Other risk factors include conflicts around the world and potential policies from the incoming administration of Donald Trump.

Still, global airline revenues in 2025 are expected to increase by 4.4% in 2025 to exceed $1 trillion for the first time, while global passenger numbers are expected to exceed 5 billion for the first time, at 5.2 billion.

Furthermore, passenger demand measured in revenue passenger kilometres is expected to grow by 8.0%, ahead of a 7.1% expected expansion of capacity measured in available seat kilometres, boosting already-high load factors.

And whatever happens in 2025 – and wherever the 2024 net profit eventually lands – it is worth noting that industry profitability is on track to significantly exceed the 2019 level of $26.4 billion. Moreover, a profit of $36.6 billion in 2025 would be the industry’s second-best performance, behind $37.6 billion in 2017.