Air Cargo Industry Faces Margin Challenges Amid Aviation Bounce Back

Current State of Air Cargo

The air cargo industry finds itself navigating a tricky patch, even as the aviation sector as a whole seems to be on the mend. The International Air Transport Association (IATA) recently issued a revised financial outlook, predicting worldwide airline net profits to reach US$36 billion this year, a jump from US$32.4 billion in 2024. However, lurking beneath this positive surface are persistent structural problems, especially in the cargo sector. Despite witnessing a meager volume increase of 0.6 percent to 69 million tonnes, air cargo revenues are set to decline by 4.7 percent, landing at US$142 billion.

Pressure Points for Cargo Operators

While airlines may be getting back on their feet, cargo operators are feeling the squeeze. Factors like subdued global trade, heightened compliance costs, and ongoing capacity constraints are putting pressure on profit margins.

2025 could offer a brighter outlook, according to IATA Director General Willie Walsh. “Even with a per-passenger profit estimated at only US$7.20, the industry’s vulnerability remains high. A sudden tax, navigation charge, or new regulatory burden could easily erase any gains,” he stated.

Global Trade Challenges

The shipping outlook for air cargo underscores a fragmented landscape in global trade. GDP growth is forecast to soften to 2.5 percent, down from 3.3 percent in 2024, compounded by protectionist policies and unpredictable cross-border regulations. Cargo yields are projected to dip by 5.2 percent in 2025, following an impressive 11.3 percent growth the previous year.

Despite these slowdowns, corporate travel tied to cargo remains resilient, with 68 percent of business travelers aiming to increase international engagements, highlighting the critical role of air cargo in time-sensitive supply chains.

Rising Fuel Costs

In terms of operational costs, jet fuel prices are projected to average US$86 per barrel in 2025, down 13 percent from 2024. While this provides some relief, it’s not a blanket fix. Cargo carriers reliant on older aircraft with higher fuel consumption rates are particularly affected, especially amid route diversions driven by geopolitical unrest.

But the real kicker? The cost of Sustainable Aviation Fuel (SAF) is skyrocketing. Its production is set to double to 2 million tonnes, but it remains a mere 0.7 percent of global aviation fuel use. The price is projected to be over four times that of conventional fuel, primarily due to regulatory costs and supply hiccups in Europe.

Walsh expressed concern, stating, “The behavior of fuel suppliers is outrageous. We need exponential production increases to avoid SAF becoming a luxury item.”

Aircraft Availability and Maintenance Challenges

A severe aircraft shortage poses one of the most critical challenges for the industry. Global orders for aircraft now exceed 17,000, yet only 1,692 new deliveries are anticipated this year, resulting in a staggering 26 percent shortfall from earlier predictions. Current wait times for new aircraft are extending beyond 14 years.

In addition, engine problems with PW1000G-equipped jets have grounded over 1,100 relatively new aircraft, which accounts for nearly 3.8 percent of the global fleet, tripling pre-pandemic levels. This delay in fleet renewal forces cargo operators to rely on older, less efficient aircraft—with an average age of 15 years.

Regional Variances in Profitability

When examining profitability across regions, the picture is mixed. The Middle East boasts a profitability margin of 8.7 percent, while Europe expects US$11.3 billion in profits, thanks to favorable conditions regarding aircraft availability and currency stability. However, Latin America is projected to see a decline in profitability due to currency depreciation and proposed VAT hikes on air travel.

In Asia-Pacific, despite robust traffic flows, the industry faces major economic headwinds, particularly from China. On the other hand, Africa continues to struggle with deep-rooted issues such as limited access to spare parts and underdeveloped infrastructure.

Strategies for Future Resilience

To counter these challenges, IATA has laid out key strategic priorities for cargo stakeholders. Harmonizing trade documentation and customs procedures is vital to decrease delays and minimize transaction costs.

Additionally, there is a pressing need to accelerate digital adoption. Implementing the e-Air Waybill and IATA’s ONE Record framework will improve cargo visibility, automate processes, and reinforce operational resilience.

On the sustainability front, specific policy support for SAF adoption is urgently needed. Unlike passenger airlines, many freighter operators currently lack access to incentive programs or offset markets. IATA advocates for dedicated financing mechanisms to make SAF more accessible.

Finally, modernizing aging fleets and expanding maintenance, repair, and overhaul (MRO) capacities must come to the forefront. Without these investments, cargo operators risk lagging behind in both performance and environmental compliance.

Tulevaisuuden näkymät

The global aviation community carries a cautious optimism for 2025, yet the air cargo sector continues to grapple with significant complexities. Margin pressures, regulatory costs, and infrastructure bottlenecks are forging a challenging operating climate that demands unified efforts from policymakers and manufacturers alike.

As Walsh adeptly summarized, “Resilience must be engineered—not assumed.” In this evolving landscape, maintaining a competitive edge in the air cargo sphere hinges on smart investments, structural reforms, and a renewed focus on sustainability.

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