(MENAFN- AsiaNet News)

McKinsey Report Predicts Air Travel Slowdown Amid High Industry Costs

More than half of airlines expect a slowdown in air travel over the next two to three years as higher jet fuel prices, rising maintenance costs and aircraft delivery delays weigh on the industry's growth outlook, according to a report by McKinsey. The report said geopolitical uncertainty and ongoing conflicts could disrupt air traffic patterns and fuel prices, while higher operating costs could affect passenger demand. Since air travel is price-sensitive, rising fuel and maintenance expenses could put further pressure on airlines.“A recent survey reveals that 56 per cent of airlines expect a slowdown in air travel in the next two to three years,” the report said. Capacity constraints arising from aircraft delivery delays and engine-related challenges could also affect the balance between supply and demand.

The report, citing 2025 financial data, highlighted a mixed financial picture for the industry. Eight of the 11 aviation subsectors recorded positive economic profit in 2025, the highest proportion since the pandemic, although the overall aviation value chain continued to fall short of covering its cost of capital. The global airline sector recorded an economic loss of USD 12.8 billion in 2025, around 40 per cent lower than its average annual loss of USD 20.9 billion during 2012–19. Its economic profit margin improved to minus 1.2 per cent from an average of minus 2.8 per cent in the pre-pandemic period. Around 40 per cent of airlines earned their cost of capital in each of the past three years, nearly twice the long-term historical average. McKinsey said 82 per cent of airlines that created value in 2025 had also done so in 2024, suggesting that some carriers were sustaining profitability through premium products, additional revenue streams, loyalty programmes and operational efficiency. While airlines, airports and aircraft manufacturers accounted for most of the industry's losses, several service segments, including catering, ground handling, aircraft maintenance and travel technology, returned to positive economic profit. The report further said artificial intelligence could create opportunities to improve pricing, predictive maintenance and customer services, helping airlines become more efficient. However, it cautioned that higher fuel prices and operational constraints could continue to challenge the industry's recovery. "The aviation value chain has once again failed to earn its collective cost of capital," the report said.

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