The third quarter of 2025 marked a mixed but generally profitable period for the global airline industry, with performance diverging across regions as carriers navigated uneven economic conditions, rising costs, and shifting geopolitical realities.
Worldwide GDP expanded by 3.1% year-over-year, supporting a 4.6% increase in revenue and global operating margin of 11.3%. In several regions, however, operating costs grew faster than revenues, pressuring margins. Our latest “Airline Economic Analysis” report details the industry’s Q3 2025 performance and discusses how a changing industry landscape is impacting network design and fleet deployment (subscribe for quarterly updates).
Global capacity and costs increase as Europe and LatAm lead margins
Globally, the airlines we track grew capacity by 3.8%, while operating margin was slightly down versus the prior year. Revenue per available seat-mile (RASM) rose by 0.7% but was outpaced by cost per available seat-mile (CASM) growth of 1.4%, reflecting higher operating expenses. Fuel, one of the industry’s single largest costs, increased modestly, by 1% from last year.
European and Latin American airlines saw the largest margin gains, buoyed by strong underlying revenue growth. In both regions, GDP grew in excess of 2%. In Europe, capacity growth was more constrained, at 2.6%, leading to higher RASM and CASM. Capacity grew faster in Latin America, by 6.1%, leading to lower RASM growth but a reduction in CASM.
The North American airlines, meanwhile, realized the largest margin decline, as lower GDP growth of 1.2% contributed to relatively slow revenue growth, which failed to outpace expenses. Capacity grew by 2.6%. The region as a whole remained profitable, but this was driven by full-service carriers, as the low-cost segment continued to produce losses.
A new landscape is changing airline networks and fleet deployment
Airlines worldwide are responding to shifting demand patterns, economic pressures, and geopolitical forces as they design their route networks and deploy their fleets. Overall, the trend is toward longer short-haul flights and shorter long-haul flights, all on larger aircraft.
Canada and Europe are leading the way in increasing the distance of short-haul flights. In Canada, for example, airlines are responding to lessening US travel demand by reallocating some US flights to destinations in Latin America. Meanwhile, the continued closure of Russian airspace for many of the world’s airlines has impacted some of the longest routes globally. The increased time and expense of flying around Russia has led to the cancelation of some routes and to different service patterns. For instance, seats from Europe to Asia are down 3% from 2019, while seats to the Middle East (where large connecting hubs exist) are up 65%.
The industry also continues to favor the use of larger aircraft. While the trend holds true globally, it is perhaps most pronounced in North America, where regional jet (RJ) use continues to decline (especially for smaller variants). The US, which accounts for 63% of RJ operations, has seen a 54% reduction in small RJ operations. This comes as increasing pilot costs continue to disproportionately impact the economics of smaller aircraft types.
