NEW YORK - Despite potential limitations due to capacity constraints, airlines anticipate robust travel demand to drive growth in 2025.
Major U.S. carriers, including United Airlines and Delta Air Lines, have released optimistic projections for the year. Financial analysts predict increased revenues and profits for these airlines in 2025, supported in part by reduced jet fuel costs.
Delta Air Lines CEO Ed Bastian noted that his company is on pace for its best financial performance to date.
"American consumers are in good financial shape and continue to prioritize spending on experiences," he stated, following the release of the airline's latest quarterly results.
Consumer spending remained vigorous across most sectors in 2024, with air travel standing out as a particularly strong category, showing consistent growth each month through November, based on personal consumption expenditure data.
Airline stocks were among the top performers on Wall Street in 2024, with Delta's shares increasing by 50% and United Airlines' stock more than doubling in value. This upward trend has largely continued into 2025, buoyed by expectations of rising profits.
However, the industry is grappling with supply chain challenges that are impacting capacity.
John Grant, chief analyst at OAG, a travel data firm, commented, "The capacity issues observed in 2024 are expected to persist through 2025 and into 2026, as airlines contend with the consequences of maintenance, repair, and overhaul bottlenecks, along with production delays from major aircraft manufacturers."
Both airlines and aircraft manufacturers are experiencing widespread part shortages. Boeing's ongoing difficulties remain a significant impediment for the sector. The company reported nearly $3 billion in charges in the fourth quarter of 2024 and has faced work stoppages due to strikes.
These supply-related issues limited capacity growth in 2024 and are projected to continue to do so in 2025, according to the International Air Transport Association (IATA). The organization forecasts a global passenger capacity increase of 7.5% in 2025, with North America seeing a 2.8% rise, marking a further deceleration from 2024.
"This is restricting growth opportunities and inflating various cost areas, including aircraft leasing and maintenance," IATA stated in its 2025 forecast.
Constrained capacity growth has dampened passenger traffic growth. IATA anticipates an 8% global increase in 2025, with North America experiencing a 3% rise.
Despite these constraints, the projected growth is sufficient to bolster forecasts for major airlines. Wall Street anticipates a 23% profit increase for Delta in 2025. Analysts also project profit growth of around 24% for United Airlines and 23% for American Airlines.
The U.S. airline industry may also benefit from a more favorable regulatory environment. This could involve reduced oversight on airfare fee disclosures and relaxed penalties for flight delays.