The global aviation sector is at a crossroads. Passenger demand has rebounded strongly after the pandemic, yet airlines and airports continue to face challenges from rising costs, fluctuating fuel prices, and increasing regulatory pressures. For aviation businesses, the ability to adapt quickly to these dynamics is critical to maintaining profitability and growth.
Passenger demand rebounds but unevenly
According to the International Air Transport Association (IATA), global air passenger traffic in 2024 returned to 104% of 2019 levels, with growth expected to continue in 2025 at around 3–4% annually. However, recovery has not been uniform across all regions. Asia-Pacific markets have seen the fastest rebound, while parts of Europe and Africa continue to lag due to capacity constraints and economic headwinds.
Financial pressures on airlines
Despite demand recovery, financial challenges remain. IATA forecasts airline industry net profits of $30.5 billion in 2024, up from $27.4 billion in 2023. Yet profit margins are slim, averaging just 3.1% globally. Rising fuel costs—accounting for roughly 30% of operating expenses—and labour shortages are squeezing profitability, forcing carriers to review their cost structures and explore efficiency gains.
Infrastructure and operational constraints
Airports and air traffic control systems are under significant pressure. Delays and capacity limitations are increasingly common, particularly in Europe. Eurocontrol data shows that average flight delays across European airspace reached 15.5 minutes per flight in 2024, nearly double pre-pandemic averages. These inefficiencies not only increase costs for airlines but also impact passenger satisfaction and loyalty.
Fleet renewal and financing
Many airlines are accelerating fleet renewal programs to improve efficiency and reduce emissions. Airbus and Boeing together delivered more than 1,200 aircraft in 2024, yet order backlogs now exceed 14,000 aircraft, with delivery timelines stretching into the next decade. Financing these investments is a major challenge, particularly for smaller carriers with limited access to capital markets.
Regulatory and sustainability demands
Environmental regulation is shaping the industry’s long-term direction. The EU’s “Fit for 55” package and CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) are pushing airlines toward lower-emission technologies and sustainable aviation fuels (SAF). IATA projects that SAF production will reach 1.5 million tonnes in 2025, still less than 1% of total jet fuel demand, highlighting the scale of the transition challenge.
Shifts in business models
Airlines are adapting business models to cope with new realities. Low-cost carriers continue to expand aggressively, while full-service airlines are restructuring routes and partnerships. Ancillary revenues—such as baggage fees, seat upgrades, and loyalty programs—accounted for nearly $120 billion in 2024, or 15% of total airline revenues, underlining the need for diversified income streams.
The role of advisory and support services
In this environment, access to independent aviation advisory services is proving vital. Airlines, airports, and related businesses require expert guidance on financing, operational efficiency, regulatory compliance, and strategic planning. Advisory support helps businesses manage risk, secure investment, and adapt to the evolving demands of passengers and regulators alike.
Outlook for the next decade
The aviation sector is expected to double in passenger numbers by 2040, with IATA forecasting 8.9 billion travellers annually. To capture this growth, industry players must address immediate pressures while preparing for long-term transformation. Those that embrace innovation, strengthen resilience, and engage with experienced advisory partners will be best positioned to navigate the turbulence ahead.
