3 Airline Stocks to Buy Despite IATA's Soft 2025 Profit Forecast

Core Insights - The Zacks Transportation - Airline industry is facing challenges such as economic uncertainties, supply chain issues, high labor costs, and aircraft shortages, leading to a reduction in IATA's traffic and profit forecasts for 2025 [1][11]. Industry Forecast - IATA now projects a net profit of $36 billion for the airline industry in 2025, slightly down from the previous estimate of $36.6 billion, but still higher than the 2024 net profit of $32.4 billion [3][11]. - Total revenues are expected to reach $979 billion in 2025, with passenger revenues projected at a record $693 billion, which is 1.3% higher than 2024 but below the earlier forecast of $1 trillion [4][11]. - The number of passengers is expected to be 4.99 billion in 2025, a 4% increase from 2024, but lower than the previous estimate of 5.22 billion [4]. Revenue Breakdown - Passenger revenues are the primary driver for the 2025 projections, anticipated to be $693 billion, which is 1.6% above 2024 levels [5]. - Ancillary revenues are expected to increase by 6.7% compared to 2024 [5]. - Cargo revenues are projected to decline to $147 billion, a 4.7% year-over-year decrease, due to reduced GDP growth and lower demand [6]. Cost Projections - Total costs for 2025 are projected at $913 billion, which is 1% higher than 2024 but lower than the previous forecast of $940 billion, mainly due to reduced fuel costs [7]. - The average jet fuel cost is expected to decrease to $86 per barrel in 2025 from $99 per barrel in 2024, leading to a total fuel bill of $236 billion [7]. Aircraft Deliveries - A total of 1,692 aircraft are expected to be delivered in 2025, which is nearly 26% lower than previous estimates, with further downward revisions possible due to ongoing supply chain issues [8]. Regional Performance - North American carriers are projected to generate net profits of $12.7 billion in 2025, while European carriers are expected to see profits rise to $11.3 billion, driven by strong passenger demand [9]. - Net profits from Asia Pacific, Latin America, the Middle East, and Africa are expected to be $4.9 billion, $1.1 billion, $6.2 billion, and $0.2 billion, respectively [9]. Investment Opportunities - Companies such as Ryanair Holdings (RYAAY), Copa Holdings (CPA), and SkyWest (SKYW) are highlighted as potential investment opportunities due to their favorable earnings revisions and strong performance despite industry headwinds [2][11][12]. - Ryanair has a Zacks Rank 1 and has shown a 46.6% average earnings surprise over the past four quarters [15][16]. - Copa Holdings also holds a Zacks Rank 1 and has consistently beaten earnings estimates, with an average beat of 5.5% [18]. - SkyWest has a strong earnings surprise track record, surpassing estimates in each of the last four quarters with an average beat of 17.1% [20].