Moody’s Ratings today announced that it has revised its outlook for the global airline industry to negative. The industry’s operating profit growth forecast for 2025 has been revised to a moderate 1% increase, significantly below the previous forecast of double-digit growth. This revision is primarily attributable to a decline in domestic demand for leisure travel in the U.S., especially among price-sensitive consumers.
Key highlights of the report:
- US Domestic Demand: Demand for domestic leisure air travel in the U.S. has seen a significant slowdown in early 2025, negatively impacting airlines’ revenue growth estimates for the first quarter. The most affected airlines include Southwest Airlines Co., Allegiant Travel Company, JetBlue Airways Corp. and Spirit Airlines, LLC.
- and International Travel: Demand for cabin and international travel originating in the U.S. remains robust, but there are signs of weakening. Traditional airlines are managing to compete with low-cost carriers for basic economy seats, although this is putting pressure on their operating profits.
- European Market: Major European airlines such as Deutsche Lufthansa, IAG (owner of British Airways) and Air -KLM are facing challenges on their North Atlantic routes. Despite an increase in bookings from the US to Europe, travel in the opposite direction has declined. Transportes Aéreos Portugueses is planning to expand its routes to North America.
- Canadian Sector: Canadian airlines such as Air Canada and WestJet Airlines are facing a decline in travel between Canada and the U.S., but are expanding their domestic and international routes to offset the decline.
- Latin America: The airline industry in Latin America remains robust but faces risks due to the economic slowdown and falling disposable income. Airlines such as Azul, Aeroméxico and Avianca are adapting to weather the volatility.
Mitigation factors:
- Fuel Costs: Lower fuel costs globally will help prevent a further deterioration in the industry's operating profit.
- Revenue Diversification: Airlines with greater revenue diversification, including international networks and loyalty programs, are better positioned to meet the challenges.
Future perspectives:
Moody's may change the outlook to stable if airline operating profit increases by up to 5% annually over the next 12 to 18 months. A positive outlook may be considered if operating profit growth exceeds 5% during the same period.
the full report here.
Via Moody's
Read also
