Despite improving financially this year, the aviation industry is still bracing for uncertainties from tariff policies, geopolitical conflicts and supply chain disruption, according to the International Air Transport Association (IATA).
Speaking at IATA's annual summit in New Delhi this week, IATA director-general Willie Walsh said that even though airline revenue this year is projected to record a record high of US$979 billion, this is a downgrade from $1 trillion forecast in December due to softer demand.
Lower fuel prices should help offset expenses, leading to net profit of $36 billion with a margin of 3.7% this year, improving from $32.4 billion and a 3.4% margin recorded in 2024, according to IATA.
The average jet fuel price is expected to hover around $86 per barrel, down from around $99 per barrel last year.
While global gross domestic product (GDP) growth is expected to hit 2.5% in 2025, which could have an impact on the aviation industry, the IATA still expects "healthy growth" in revenue passenger kilometres of 5.8% year-on-year, led by Asia-Pacific at 9%. Airlines' passenger revenue is expected to reach $693 billion.
Strong competition and a lower oil price continue to benefit passengers, with average airfares at $374 this year, or around 40% lower than that of 2014, said Mr Walsh.
Cargo revenue is expected to drop by 4.7% year-on-year to $142 billion, attributed to lower GDP growth, which has been influenced by trade and tariff policies.
Mr Walsh said IATA, which represents over 350 airlines covering 80% of global air traffic, has not seen any evidence of US tariffs leading to higher aircraft costs. He said airlines would obviously object to rising jet prices.
"Our preference is aerospace aircraft and aircraft engines be excluded from tariff regimes," said Mr Walsh, adding that aviation has a complex supply chain with parts manufactured and assembled around the world.
He said supply chain logjams still hamper airlines expanding to meet passenger demand.
The number of unfulfilled orders tally 17,000 aircraft, exceeding the average 10,000-11,000 orders usually recorded before the pandemic, with a waiting time of 14 years. This drives up airlines' maintenance costs and lowers their operational efficiency.
Accordingly, geopolitical tensions will continue to rock the industry, such as the Russia-Ukraine war, which led to airspace closures as it forces airlines to extend flight hours and increases operational costs for long-haul flights.
Mr Walsh said civil aviation must never be the target of military operations. However, in the last 12 months, two civil planes were downed in those conflict zones, and several airports for civilian aircraft were bombed during the military operations.
The association said governments should enhance intelligence sharing to prevent civil aviation incidents.
While the aviation industry is targeting net zero by 2050, its pathway remains challenging.
Use of sustainable aviation fuel, expected to gain in popularity as a method to reduce emissions, should double to 2 million tonnes this year, accounting for 0.7% of total airline fuel usage.
Asian challenge
Ross Leggett, managing executive officer and senior vice-president for route marketing at Japan Airlines, said that while the airline is monitoring the impact of the US tariffs, it has not registered a slowdown for forward bookings for flights between America and Japan.
Mr Leggett said demand from Japanese travellers visiting the US this summer remains strong.
Meanwhile, US demand to visit Japan is even stronger, as the country is considered a popular international destination, thanks in part to its weak currency.
Bookings from Southeast Asia and China to visit Japan have also been solid, for both Japan Airlines and the group's low-cost carriers.
Mr Leggett said it is maintaining its mid-term plan to expand routes connecting North America and Asia-Pacific using Japan as a hub.
Even though the weak yen continues to bolster Japan's inbound tourism, it has also increased costs for airlines, as expenses for planes, parts and fuel are typically paid in US dollars.
Mr Leggett said international airfares can be adjusted to gain higher yield, but it is more challenging for domestic routes, as the airline still has to maintain competitive airfares to compete with Shinkansen bullet trains.
Despite ongoing supply chain disruption, he said Japan Airlines' delivery of new planes remains active, including the Boeing 737 Max 8. It is still acceptable with a six-month delay, he said.
