Airline Industry Profits Hold Steady In Q2 2025 Results

Despite uncertainty at the start of 2025, the airline industry logged a profitable second quarter as the global economy grew slightly.

Carriers tracked in our quarterly Airline Economic Analysis saw capacity and revenue growth, with an operating margin similar to the prior year despite dropping fuel costs. While carriers in the Americas posted small margin declines, other regions in our global index showed improvement.

In our latest report, we provided an in-depth look at the airline industry’s second quarter of 2025 and analyze the US Department of Transportation’s 2024 year-end data. (Subscribe for updates).

European and Asian airlines deliver higher profits despite costs

Against the backdrop of a 3% rise in global GDP and a 13% decline in fuel costs, airlines grew capacity by about 5% and revenue by 7.7%. Carriers produced an operating margin of about 10%, with operating costs (CASM) increasing 2.5% and revenue (RASM) rising 2.4%.

The four regions reporting quarterly data in our index had mixed results. European airlines had a standout quarter, with a 2.3% increase in operating margin on a year-over-year basis. 

In contrast, capacity growth combined with softening demand resulted in lower profits for North American airlines. Carriers had a 1.7% decrease in operating margin as costs outpaced revenue growth. Domestic capacity was up 2.5% , but demand weakness contributed to a 6.2% drop in fares.

Latin American airlines maintained profitability with an 11% margin on solid capacity growth. In the Asia-Pacific region, full-service carriers sustained profits amid 8% capacity growth.

Full-service carriers extend profit lead over low-cost carriers

Full-service carriers (FSCs) and value/low-cost carriers (LCCs) in Europe substantially increased both capacity and revenue. LCCs saw a 4.5% increase in operating margin compared to 0.1% for FSCs, though FSCs improved their second-quarter margin over the prior quarter.

In North America, both FSCs and value/LCCs stayed profitable despite margin declines, though FSCs had much stronger results with 10.4% compared to 1.9% for LCCs. Capacity for FSCs also grew at 4% compared to less than one percent for LCCs. Both groups kept the cost per available seat mile relatively stable. 

Latin American FSCs widened their margin advantage over LCCs, primarily by narrowing the CASM gap. 

Full-service carriers led the US industry in 2024 despite challenges  

Taking a closer look at the US industry, FSCs continued to lead in profitability in 2024, according to our annual review of the US Department of Transportation’s year-end data. FSCs increased revenue by 5.1%, to $173 billion, while lower-cost carriers struggled to extend pandemic-era gains. 

LCCs and ultra- low-cost carriers (ULCCs) faced rising labor costs that eroded their historical advantage and resulted in cost convergence. For LCCs, domestic costs per unit in 2024 were only 5% lower than FSC compared to 12% in 2022. Excluding transport-related income, LCC revenue growth was about 0.5%. ULCCs, which have been unprofitable since the pandemic, had revenues decrease by about 1%.

Amid ongoing challenges, FSCs are better positioned than lower-cost airlines and will likely continue to lead the industry.