The State of Aviation 2025

After some turbulent years, the airline sector is on a recent upswing. In 2023 and 2024, nearly half the airlines we track created positive economic value, and the sector as a whole came close to earning its cost of capital. But the industry remains fragile—vulnerable to economic uncertainty, geopolitical tensions, and potential imbalances between capacity and demand. Future profitability will depend on airlines’ ability to navigate external pressures while sharpening internal performance. Improving on-time reliability, ancillary revenue generation, and organizational health could be avenues for airlines to create stronger returns.

In North America, discount carriers have experienced a postpandemic decline in profitability and growth. This slowdown can be attributed in part to rising labor costs, a spending gap between higher- and lower-income travelers, and a wave of more budget-friendly offerings from competing full-service airlines. Vigilant cost control, strong value propositions, and an understanding of the fluidity of customer segments could help low-cost airlines catch a second wind. Meanwhile, airlines of all types—all over the globe—can eye this trend and consider its implications for their own businesses.

Overcoming some common misconceptions could help the airline sector boost its retailing efforts. A new survey of air traveler preferences helps identify what consumers really want. Beyond price, travelers strongly value easier booking processes and trustworthy brands. Personal recommendations from friends and family can wield more influence than social media. Many travelers spend significant time researching before booking. And while direct bookings are on the rise, intermediaries remain important. To capture more value, airlines can adopt multichannel strategies, enhance their merchandising, and provide travelers with personalized, practical support.

Airline planning—which involves scheduling every aspect of flights and all the components that support them—has always been challenging, given the unpredictability of inputs such as passenger demand, crew availability, and weather. But airlines face an opportunity to improve their planning processes by updating their technology, methods, and mindsets. Better planning tools might more fully mesh commercial and operational considerations. Airlines could prioritize customer experience over scheduling constraints. Flights could be planned days, not months, in advance. The potential rewards stemming from truly integrated planning are considerable.

Rising passenger demand for air travel is meeting with a constrained supply of new aircraft. While passenger demand has rebounded from pandemic-era lows and is projected to keep growing, delivery times for newly manufactured aircraft—and maintenance turnaround times for planes in existing fleets—have slowed. The resulting divergence between demand and supply is creating a concerning mismatch. How big is this gap? Is it poised to grow or shrink? What actions can industry stakeholders take to help level the imbalance and achieve equilibrium?