New Delhi: Ongoing geopolitical and economic uncertainties present the most significant risks to the airline industry outlook, said International Air Transport Association (IATA) director general Willie Walsh. Walsh highlighted that economic challenges such as tariffs and extended trade disputes continue to threaten air cargo and potentially impact passenger travel.
According to BERNAMA News Agency, Walsh expressed concerns about the uncertainty surrounding the trade policy under the administration of US President Donald Trump, which might delay crucial business decisions that drive economic activity and, consequently, the demand for air cargo and business travel. Additional risks to the industry outlook this year include the ongoing Russia-Ukraine conflict, fragmentation of global standards, weakening of multilateral institutions and agreements, and fluctuating oil prices.
Walsh suggested that resolving conflicts like the Russia-Ukraine war would benefit airlines by reconnecting separated economies and reopening closed airspace. He cautioned that any expansion of military activity could negatively impact the industry. The fragmentation of global standards or weakening of multilateral agreements could also introduce additional costs through a more complex regulatory environment, affecting strategic decision-making and operations.
Oil prices remain a significant factor in airline profitability. Walsh noted that the complexities influencing oil prices, such as economic growth projections, extraction activities, decarbonization policies, sanctions, refining capacity availability, and potential transport blockages, could lead to rapid price volatility, impacting airline financial outcomes.
During the group’s annual meeting in New Delhi, IATA, representing around 350 airlines that account for over 80 per cent of global traffic, announced updates to its 2025 airline industry financial outlook. These updates show improved profitability over 2024 and resilience amid global economic and political changes. The first half of 2025 has introduced significant market uncertainties. Nonetheless, based on various measures, including net profits, 2025 is projected to be a better year for airlines than 2024, though slightly below previous projections.
The primary positive factor is a 13 per cent decline in jet fuel prices compared to 2024, with prices now 1 per cent below prior estimates. IATA also anticipates that airlines will transport more passengers and cargo in 2025 than the previous year, despite trade tensions and declining consumer confidence affecting earlier demand forecasts. Net margins are expected to increase to 3.7 per cent in 2025 from 3.4 per cent in 2024.
Walsh pointed out that although global GDP growth is predicted to decrease from 3.3 per cent in 2024 to 2.5 per cent in 2025, airline profitability is forecast to improve, mainly due to falling oil prices. Additionally, continued strong employment and moderating inflation projections are anticipated to sustain demand growth, albeit at a slower pace than previously expected.