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3 Airline Stocks to Bet on Post IATA's Bullish 2025 Forecast
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The stronger-than-expected recovery of air travel demand following the end of the pandemic is supporting growth of the Zacks Transportation - Airline industry. While air travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an impressive comeback.
Passenger volumes moved northward during the summer season and during the Thanksgiving holiday period this year. The latest positive update on airlines is the bullish projection for 2025 by the International Air Transport Association or IATA, despite the existing economic uncertainties and supply-chain issues. The uptick in passenger volumes contributed to IATA forecasting passenger count to exceed 5 billion across the globe in 2025 for the first time. Given the positivity surrounding the industry, we believe betting on airline stocks like United Airlines (UAL - Free Report) , SkyWest (SKYW - Free Report) and Ryanair Holdings (RYAAY - Free Report) is a prudent move.
IATA’s FY25 Projection in Detail
Owing to the buoyant air travel demand scenario, IATA expects the industry to generate a net profit of $36.6 billion (net profit margin of 3.6%) in 2025 compared with $31.5 billion estimated for 2024. Operating profit in 2025 is expected to be $67.5 billion for a net operating margin of 6.7% ( 6.4% is expected in 2024). The top line in 2025 is now anticipated to be $1.007 trillion (crossing the $1 trillion mark for the first time). The revenue projection reflects a 4.4% increase from the 2024 expectation.
Passenger revenues are the biggest driver of the rosy projection for 2025. Per IATA, passenger revenues in 2025 are anticipated to be $705 billion, which is 70% of total revenues. Ancillary revenues are expected to be $145 billion. Per IATA, a record 5.2 billion people are likely to take to the skies in 2025.
Cargo revenues in 2025 are expected to be $157 billion, which, though lower than the 2023 actuals of $138 billion, are still higher than the pre-pandemic levels. Cargo volumes in 2025 are expected to reach 72.5 million tons, a 5.8% increase from the 2024 expectation.
Total costs in the next year are projected to be $940 billion, 4% higher than the 2024 estimate, primarily due to high labor costs, which are expected to increase 7.6% from 2024 estimates. Per IATA, the average jet fuel cost is expected to be $87 per barrel in 2025, down from $99 per barrel estimated in 2024. The total fuel bill in 2025 is expected to be $248 billion, down 4.8% from the 2024 estimate. The projection for the 2025 fuel bill implies that fuel expenses account for 26.4% of total operating costs.
On a region-wise basis, North American carriers are expected to be the major contributors to the next-year net profit projection. They are expected to reap net profits of $13.8 billion or $11.8 per passenger next year. Reflecting the improved air travel demand scenario, passenger demand this year is likely to grow 3% year over year. European carriers are expected to reap net profits of $11.9 billion. The performance of carriers in regions like Latin America, the Middle East and Asia Pacific is also likely to improve, mainly owing to higher passenger volumes.
3 Airline Stocks to Buy Now
Given this encouraging backdrop, we believe airline stocks should be in one’s portfolio so that they can reap healthy returns. 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 next year.
SkyWest has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 79.12%. The Zacks Consensus Estimate for current and next-year earnings have been revised 4.1% and 7.1% upward, respectively, over the past 60 days.
Image Source: Zacks Investment Research
United Airlines, based in Chicago, currently carries a Zacks Rank #2. The Zacks Consensus Estimate for current and next-year earnings have been revised 3.5% and 3.6% upward, respectively, over the past 60 days.
Strong air travel demand, supported by new routes, represents a major tailwind for UAL. The environment-friendly approach also bodes well for the company.
Image Source: Zacks Investment Research
Ryanair, based in Ireland, currently carries a Zacks Rank #2. Upbeat air travel demand is aiding the company. The carrier has reported impressive traffic numbers for the past few months, driven by upbeat passenger volumes.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The Zacks Consensus Estimate for next-year earnings has been revised 1.04% upward over the past 60 days.
Image Source: Zacks Investment Research
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3 Airline Stocks to Bet on Post IATA's Bullish 2025 Forecast
The stronger-than-expected recovery of air travel demand following the end of the pandemic is supporting growth of the Zacks Transportation - Airline industry. While air travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an impressive comeback.
Passenger volumes moved northward during the summer season and during the Thanksgiving holiday period this year. The latest positive update on airlines is the bullish projection for 2025 by the International Air Transport Association or IATA, despite the existing economic uncertainties and supply-chain issues. The uptick in passenger volumes contributed to IATA forecasting passenger count to exceed 5 billion across the globe in 2025 for the first time. Given the positivity surrounding the industry, we believe betting on airline stocks like United Airlines (UAL - Free Report) , SkyWest (SKYW - Free Report) and Ryanair Holdings (RYAAY - Free Report) is a prudent move.
IATA’s FY25 Projection in Detail
Owing to the buoyant air travel demand scenario, IATA expects the industry to generate a net profit of $36.6 billion (net profit margin of 3.6%) in 2025 compared with $31.5 billion estimated for 2024. Operating profit in 2025 is expected to be $67.5 billion for a net operating margin of 6.7% ( 6.4% is expected in 2024). The top line in 2025 is now anticipated to be $1.007 trillion (crossing the $1 trillion mark for the first time). The revenue projection reflects a 4.4% increase from the 2024 expectation.
Passenger revenues are the biggest driver of the rosy projection for 2025. Per IATA, passenger revenues in 2025 are anticipated to be $705 billion, which is 70% of total revenues. Ancillary revenues are expected to be $145 billion. Per IATA, a record 5.2 billion people are likely to take to the skies in 2025.
Cargo revenues in 2025 are expected to be $157 billion, which, though lower than the 2023 actuals of $138 billion, are still higher than the pre-pandemic levels. Cargo volumes in 2025 are expected to reach 72.5 million tons, a 5.8% increase from the 2024 expectation.
Total costs in the next year are projected to be $940 billion, 4% higher than the 2024 estimate, primarily due to high labor costs, which are expected to increase 7.6% from 2024 estimates. Per IATA, the average jet fuel cost is expected to be $87 per barrel in 2025, down from $99 per barrel estimated in 2024. The total fuel bill in 2025 is expected to be $248 billion, down 4.8% from the 2024 estimate. The projection for the 2025 fuel bill implies that fuel expenses account for 26.4% of total operating costs.
On a region-wise basis, North American carriers are expected to be the major contributors to the next-year net profit projection. They are expected to reap net profits of $13.8 billion or $11.8 per passenger next year. Reflecting the improved air travel demand scenario, passenger demand this year is likely to grow 3% year over year. European carriers are expected to reap net profits of $11.9 billion. The performance of carriers in regions like Latin America, the Middle East and Asia Pacific is also likely to improve, mainly owing to higher passenger volumes.
3 Airline Stocks to Buy Now
Given this encouraging backdrop, we believe airline stocks should be in one’s portfolio so that they can reap healthy returns. 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 next year.
SkyWest currently sports a Zacks Rank #1. SKYW is benefiting from high revenues from flying agreements and fleet modernization efforts. You can see the complete list of today’s Zacks #1 Rank stocks here.
SkyWest has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 79.12%. The Zacks Consensus Estimate for current and next-year earnings have been revised 4.1% and 7.1% upward, respectively, over the past 60 days.
United Airlines, based in Chicago, currently carries a Zacks Rank #2. The Zacks Consensus Estimate for current and next-year earnings have been revised 3.5% and 3.6% upward, respectively, over the past 60 days.
Strong air travel demand, supported by new routes, represents a major tailwind for UAL. The environment-friendly approach also bodes well for the company.
Ryanair, based in Ireland, currently carries a Zacks Rank #2. Upbeat air travel demand is aiding the company. The carrier has reported impressive traffic numbers for the past few months, driven by upbeat passenger volumes.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The Zacks Consensus Estimate for next-year earnings has been revised 1.04% upward over the past 60 days.