3 Airline Stocks to Buy Despite IATA's Soft 2025 Profit Forecast

It is no secret that stocks in the Zacks Transportation - Airline industry are being hurt by headwinds such as economic uncertainties, supply chain issues, high labor costs, and aircraft shortages due to backlogs and delays in plane deliveries. The headwinds are primarily responsible for the International Air Transport Association, or IATA, trimming its traffic and profit forecasts for 2025.

The revised profitability forecast is, however, higher than the profits earned in 2024 , driven by declining fuel costs. Given this backdrop, investing in stocks like Ryanair Holdings RYAAY, Copa Holdings CPA and SkyWest SKYW appears prudent.

IATA’s FY25 Projection in Detail

Owing to the tariff-induced uncertainties and other abovementioned headwinds, IATA now expects the industry to generate a net profit of $36 billion (net profit margin of 3.7%) in 2025 compared with $36.6 billion estimated earlier. However, the current-year projection is higher than 2024’s net profit of $32.4 billion (net profit margin of 3.4%).

Total revenues are now expected to reach $979 billion, with passenger revenues hitting a record $693 billion, supported by increased ancillary revenues. The revenue forecast, though 1.3% higher than the 2024 actual, is below the previous projection of $1 trillion. The trimming of the revenue forecast can be attributed to trade tensions and dips in consumer confidence. Currently, 4.99 billion people are expected to take to the skies in 2025. Even though the record projection is 4% higher than 2024 levels, it is lower than the previous estimate of 5.22 billion.

Passenger revenues are the biggest driver of the projection for 2025. Per IATA, passenger revenues in 2025 are anticipated to be $693 billion, which is not only an all-time high but also 1.6% above 2024 actuals. Ancillary revenues are expected to be 6.7% above 2024 levels.

Cargo revenues in 2025 are expected to be $147 billion, indicating a 4.7% year-over-year decline. Reduced GDP growth due to trade-dampening protectionist measures, such as tariffs, led to the bearish forecast. Cargo yield in 2025 is expected to be 5.8% lower than the 2024 actual due to slower demand growth and lower oil prices.

Total costs in 2025 are projected to be $913 billion, which, though 1% higher than the 2024 actual, is lower than the earlier 2025 forecast of $940 billion, primarily due to lower fuel costs. Per IATA, the average jet fuel cost is expected to be $86 per barrel in 2025, down from $99 per barrel in 2024. The total fuel bill in 2025 is expected to be $236 billion, down from the $261 billion recorded in 2024. The projection for the 2025 fuel bill implies that fuel expenses account for 25.8% of total operating costs.

In 2025, 1,692 aircraft are expected to be delivered, which is almost 26% lower than year-ago estimates. Further downward revisions cannot be ruled out, given that supply chain issues are expected to persist in 2025.

On a region-wise basis, North American carriers are expected to be the major contributors to the current-year net profit projection. They are expected to reap net profits of $12.7 billion or $11.1 per passenger in 2025. This is below the earlier forecast of $13.8 billion for 2025 but higher than the 2024 reading of $11.5 billion. European carriers are likely to benefit from upbeat passenger demand, driven by growth in the low-cost sector. Regional net profit is likely to increase $1.7 billion from 2024 levels to $11.3 billion. IATA expects net profit from Asia Pacific, Latin America, the Middle East and Africa to be $4.9 billion, $1.1 billion, $6.2 billion, and $0.2 billion, respectively.

3 Airline Stocks to Buy Now

Agreed that the IATA’s profit forecast for 2025 has been trimmed, but it is still higher than the 2024 reading. Apart from low fuel costs, signs of easing trade tensions represent further tailwinds for airlines. Below, we present three airline stocks having a Zacks Rank #1 (Strong Buy) or #2 (Buy). Moreover, the following companies have witnessed favorable earnings estimate revisions for the current year and outperformed the industry in terms of price so far this year.

YTD Price Comparison

Ryanair currently sports a Zacks Rank #1. RYAAY, based in Ireland, is benefiting from upbeat air travel demand. You can see the complete list of today’s Zacks #1 Rank stocks here.

RYAAY has a decent earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters (missing the mark on the other occasions), delivering an average surprise of 46.6%. The Zacks Consensus Estimate for current and next-year earnings has been revised upward over the past 60 days.

Copa Holdings, based in Panama City, Panama, also carries a Zacks Rank #1. Copa Holdings is benefiting from strong air travel demand owing to factors like regional economic expansion, its ability to adapt to market trends, and its focus on innovative strategies.

Despite the tough conditions, primarily due to currency headwinds, the airline demonstrated resilience and beat the Zacks Consensus Estimate for earnings in each of the past four quarters. The average beat was 5.5%. The Zacks Consensus Estimate for current and next-year earnings has been revised upward over the past 60 days.

SkyWest, founded in 1972, is based in St. George and operates regional jets for major U.S. airlines. SKYW is the holding company for SkyWest Airlines, SkyWest Charter and SkyWest Leasing, an aircraft leasing company.

SKYW has an impressive earnings surprise track record, having surpassed the Zacks Consensus Estimate in each of the last four quarters. The average beat was 17.1%. The Zacks Consensus Estimate for current and next-year earnings has been revised upward over the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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