In 2025, the airline industry is expected to see a modest increase in passenger numbers and profitability, with a projected four per cent growth in passenger numbers to 4.99 billion, slightly below previous projections due to trade tensions. Despite these challenges, the industry is expected to achieve record revenues and higher net profits compared to 2024, reaching $36 billion, although this is also slightly below earlier forecasts. The Asia-Pacific region is anticipated to lead growth, with a nine per cent increase in Revenue Passenger Kilometers (RPK), while Europe is expected to follow with a six per cent increase.

Although many airlines are frustrated by supply chain challenges - simple economics show that restricted supply leads to higher load factors, higher airfares and ultimately profitability for some.Scheduled airline capacity this year is expected to have grown by 1.6 per cent compared to last year and by four per cent versus 2019.

South Asia, and specifically India, have raced ahead of many markets this year, with carriers such as IndiGo and Air India expanding their international networks.Meanwhile, in Africa, the growth in popularity of markets such as Morocco and Egypt has led to a 10 per cent increase in capacity compared to 2019.

More mature, developed markets such as North America and Europe have settled back into their normal rates of growth.Latin America has seen a period of strong capacity growth, driven by the low-cost airlines, which were particularly badly hit by supply chain issues in the last two years.However, some regions like Southeast Asia and the Southwest Pacific are still facing difficulties in their capacity recovery, and markets such as Indonesia continue to be challenged by supply side issues and weak demand.

For many years, airline profitability was cyclical in nature and for most was just something to dream about. However, recently airlines - and indeed many parts of the ecosystem - have become consistently profitable, which is necessary to support future investments - be that new aircraft, environmental improvements or more tailored service offerings. However, what we have noticed is wealthier airlines growing richer, while others continue to struggle.

United Airlines, IAG, Delta Air Lines, Emirates, Ryanair and other household brands increase their margins, while many scheduled airlines are at best marginal performers and in many cases incurring losses.

While it seems that everyone is expecting a slowdown in the global economy, the first half of the year appears to have been better than many anticipated.Passenger revenues are expected to soften against the high-tide mark of 2024 as a little more competition comes to the market, although at the same time average load factors are expected to rise to 84 per cent, so just hope that when travelling you are one of the lucky 16 with an empty seat beside you!

When evaluating airline profitability, it’s important to look at the industry as a whole, and industry-wide the expected margins for 2025 are no better than interest on a savings account. Obviously, congratulations to the small percentage of well-managed and very profitable airlines, but they are indeed a small percentage of all airlines operating. As many of us in the industry have been saying for years, much work must be done to drag the poorest performers forward.

The supply of new seats, galleys and even overhead storage bins are all delaying the introduction of new aircraft, but perhaps the most important supply chain shortage is the lack of human resources; as skilled pilots, engineers and management leave the industry, resulting in a skills shortage. Overlay that challenge with new airline start-ups offering extremely attractive expatriate packages to buy in the required expertise, and there is a growing crisis which cannot be filled without years of training and on-the-job experience. With shortages of ATC controllers in both Europe and North America the pressures on the industry are very real and are not going to disappear before the end of the decade at the very earliest. For many airlines, the industry is based around the US dollar, and a weakening of the dollar is good news for all airlines. With the price of oil having been well below last year’s levels (though watch this space), the combination of these two factors provides a significant cost saving for airlines, just as demand may be slipping slightly. Significant cost savings flow straight through to the bottom line and will likely continue through the rest of the year.

While the second half of the year will inevitably see some surprises, it feels as though the industry is well placed to handle any tremors in the global marketplace, and if 2025 is going to be as good as we expect despite the challenges.