Airlines Set for Record Profit Despite Hobbled US Economy
(Bloomberg) — Global airlines stand to earn a record $41 billion next year, with Europe contributing the biggest profit share as US carriers grapple with fallout from tariffs, tighter immigration enforcement and a lengthy government shutdown.
An estimated 5.2 billion passengers will take to the skies, the International Air Transport Association said Tuesday in its annual forecast. While industry profit is expected to reach a new high, the inflow is being held back by persistent supply chain issues, heightened geopolitical tensions, regulatory costs and infrastructure constraints, it said.
Europe is forecast to deliver the highest profit of all regions at $14 billion, with local airlines showing disciplined capacity management and strong load factors. The continent’s low-cost carriers are expanding at double-digit rates, fueled by local holidaymakers, and a strong euro is offsetting some inflationary pressure.
“We see Europe in absolute terms overtaking the US,” IATA Director General Willie Walsh said in an interview with Bloomberg Television. “A weakening US dollar obviously benefits airlines who are not US-dollar denominated.”
North America’s profit should edge higher to $11.3 billion, though expansion will be limited by capacity constraints, pilot shortages, engine issues and rising labor costs. Budget carriers also face pressure from a shrinking US domestic market.
US President Donald Trump’s tariffs, wars in the Middle East and Ukraine, and the tight supply chain helped drive up costs for airlines this year, IATA said.
“One of the things we are seeing in the US is weakening consumer demand because of the cost-of-living issues,” Walsh said.
The profit outlook represents a 4% increase from this year’s $39.5 billion. Industry revenue is set to hit $1.053 trillion.
The backlog in manufacturing at Boeing Co. and Airbus SE factories is crimping that growth. Carriers are waiting longer to receive aircraft deliveries and, as a consequence, are flying older jets for longer, said Stuart Fox, IATA’s director for flight and technical operations.
New planes also are taking longer to certify.
“Supply constraints, and their financial impact, will persist well beyond the near term,” according to the forecast.
(Updates throughout with Walsh interview, more details.)
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