KUALA LUMPUR: 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 said economic headwinds such as tariffs and prolonged trade disputes remain a threat to air cargo and, potentially, passenger travel.
He warned that uncertainty over how the administration of US President Donald Trump might reshape trade policy could delay critical business decisions that drive economic activity, and with it, demand for air cargo and business travel.
He added that other risks to the industry outlook this year include ongoing conflicts such as the Russia-Ukraine war, fragmentation of global standards, the weakening of multilateral institutions and agreements, and oil prices.
He said the resolution of conflicts such as the Russia-Ukraine war would benefit airlines by reconnecting de-linked economies and reopening airspace.
“Conversely, any expansion of military activity could have a dampening effect,“ said Walsh at the group’s annual meeting in New Delhi.
He said the fragmentation of global standards or weakening of multilateral institutions and agreements could bring additional costs to airlines through a more complex or unstable regulatory environment.
This includes the evolution of policies on climate, trade, facilitation and a myriad of other matters impacting airline strategic decision-making and operations, said Walsh.
“Meanwhile, oil prices are a major driver of airline profitability.
“The complex array of factors impacting oil prices—including economic growth projections, the amount of extraction activity undertaken, policies on decarbonisation, sanctions, availability of refining capacity, and transport blockages—can produce quick shifts in pricing volatility with significant impact on airline financial prospects,“ he said.
During the event, IATA, which represents some 350 airlines accounting for more than 80 per cent of global traffic, announced updates to its 2025 airline industry financial outlook, showing improved profitability over 2024 and resilience in the face of global economic and political shifts.
“The first half of 2025 has brought significant uncertainties to global markets. Nonetheless, by many measures, including net profits, it will still be a better year for airlines than 2024, although slightly below our previous projections.
“The biggest positive driver is the price of jet fuel, which has fallen 13 per cent compared with 2024 and is 1 per cent below previous estimates,“ he said.
IATA also expects airlines to carry more passengers and more cargo in 2025 than in the previous year, even though trade tensions and declining consumer confidence have softened earlier demand forecasts.
Net margins are projected to rise to 3.7 per cent in 2025 from 3.4 per cent in 2024.
“That’s still about half the average profitability across all industries. But considering the headwinds, it’s a strong result that demonstrates the resilience that airlines have worked hard to fortify,” said Walsh.
Walsh said that although global gross domestic product (GDP) growth is expected to fall from 3.3 per cent in 2024 to 2.5 per cent in 2025, airline profitability is forecast to improve, largely due to falling oil prices.
Meanwhile, he said, continued strong employment and moderating inflation projections are expected to keep demand growing, even if not as fast as previously projected.
