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Investing.com -- UBS expects global airline profits to grow in the mid-single digits in 2025, with net profits rising from $32 billion in 2024 to $35 billion according to IATA forecasts.
The investment bank projects continued traffic growth of 6.5% for the year, slightly higher than IATA’s 5.8% estimate, with year-to-date growth at 5.8%. Passenger pricing is expected to decline by approximately 1% due to lower fuel costs and potentially weaker demand.
For UBS’s coverage universe, net profits are forecast to increase from about $23 billion to $24.9 billion. Airfreight traffic is projected to show a small annual increase despite an expected 1% decline in the second half of 2025.
The analysis shows seat capacity growth in both halves of 2025, with strong expansion in Africa, Central America, and the Middle East. Europe faces more constraints compared to other markets, while Australasia is seeing a decline in capacity.
UBS forecasts 6% global capacity growth against 6.5% traffic growth, creating conditions that support fare growth. The capacity restraint stems from aircraft delivery issues, maintenance limitations, and staffing challenges, though the bank sees potential for improvement in manufacturer deliveries.
The report highlights that airline balance sheets are generally well-capitalized, with valuations appearing attractive. Comparing estimated 2025 return on invested capital (ROIC) to historical enterprise value to flight seat capacity (EV/FSC) suggests potential upside of over 50%.
UBS named its preferred airlines by region, including Ryanair and Lufthansa in Europe, Cathay Pacific in Asia-Pacific, United Airlines (NYSE:UAL) and Delta Airlines (NYSE:DAL) in North America, and Copa in Latin America.
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