The airline industry on Wall Street is gearing up for a promising 2025, bolstered by a formidable demand for travel despite facing challenges related to supply capacity. Giants like United Airlines and Delta Air Lines, along with other major U.S. carriers, have reported optimistic projections for the coming year, fueled by robust expectations for both revenue and profit increases. A significant contributor to these positive forecasts is a dip in jet fuel prices, providing a welcomed relief to the sector's expenses.
Delta Air Lines’ CEO Ed Bastian has expressed confidence, stating that the airline is on the path to achieving the best financial year in its history. He highlighted that the financially sound U.S. consumer base continues to prioritize expenditure on travel experiences, according to their latest quarterly earnings data. This sentiment resonates strongly, as consumer spending across various sectors remained resilient throughout 2024, with air transportation leading the charge each month up through November.
Stock performance mirrored this optimism, with airlines emerging as top stock gainers in 2024. Notably, Delta's shares increased by an impressive 50%, while United Airlines' stock saw its value more than double. This upward trend carries into 2025, supported by strong profit growth forecasts.
Nevertheless, the airline industry is not without its hurdles. Supply chain issues have restricted capacity expansion, a trend expected to persist well into 2026. John Grant, a chief analyst at travel data firm OAG, points out that residual effects from maintenance challenges, repair discrepancies, and production delays from major aircraft producers continue to restrain airline capacity. Boeing, in particular, remains a significant bottleneck, grappling with production setbacks as it faces substantial charges related to the fourth quarter of 2024, compounded by a strike that disrupted operations at several manufacturing sites.
The International Air Transport Association (IATA) has shed light on the shelving of capacity growth advancements in 2024, predicting a continued stunting effect in 2025. Global passenger capacity is anticipated to grow by 7.5% overall, with North America seeing a growth of 2.8%, signaling a gradual slowdown compared to last year. These constraints inevitably inflate costs in areas such as aircraft leasing and maintenance.
However, the trajectory for passenger traffic growth remains positive. The IATA forecasts global growth at 8% for 2025, with North America experiencing a 3% increase. Such momentum aligns with Wall Street's profit growth predictions, which foresee Delta's profits climbing by 23%, alongside expected growth rates of 24% for United Airlines and 23% for American Airlines.
The U.S. airline industry may also be entering an era of regulatory leniency under former President Donald Trump's administration. Potential relaxations could involve lesser scrutiny over ticket fee transparency and softened penalties for flight delays, which could further ease operational pressures on the sector.
