StateOfTheIndustry:2Q2025

AirlineEconomicAnalysis

ByTomStalnaker,KhalidUsman,GrantAlport,AndyBuchanan,andAaronTaylor

AbusinessofMarshMcLennan

CONTENT

1Introduction

2Globaloverview

3Airlineperformancebyregion

NorthAmerica(US/Canada)

Europe

LatinAmerica

Asia/Pacific

Africa/MiddleEast/India

4Specialtopic:RecentdemandtrendsintheUSmarket

5Appendix

WELCOMETOTHENEW

AIRLINEECONOMICANALYSISREPORT

WhatistheAirlineEconomicAnalysisandwhatischanging?

?TheAirlineEconomicAnalysis(AEA)

isOliverWyman’sreportonthefinancialstateoftheairlineindustry

?WehavepublishedtheAEAannually

forthepast15yearsasawrittenreport,heavilyfocusedontheUSsector

?Wearetransitioningtoaquarterlyreleasewithamoreglobalfocusandalighter,

morevisuallydrivenstyle

?TheAEAwillcontinuetoincludetraditionalin-depthanalysisincludingUSindustry

financialdeepdivesandglobalcapacitytrends

?Wewillalsocontinuetopublishfeaturesonemergingtrendsandtheirimplicationsfortheindustryanditsecosystem

Comparisonoffeatures

Priorversion

Newversion

Annual

Quarterly

Releaseschedule

Global

Coverage

USemphasis

Airlineindustry

andmacro-economics

Scope

Additionalgranularityusingproprietarytools

Format

Traditionalwrittenreport

Slideshowstyle

Deepdivetopics

Typically4areasofdeeperanalysis

Retainedandspreadthroughouttheyear

Specialtopics

Typically3to4articlesontrendingtopics

Retained,releasedasmerited

Wewillpublishquarterlyreportsandotherupdateson,sobesuretocheckbackregularly

?OliverWyman3

?OliverWyman4

NOTESONAPPROACHANDMETHODOLOGY

Resultsforeachregionarepresentedinthreesections,usingthefollowingapproach:

1.Financialresultssummary2.Resultsbybusinessmodel3.Productionreview

What

wereport

Operatingrevenue,expense,earnings,marginCapacityasavailableseat-miles(ASMs)

Revenueandcostperavailableseat-mile(RASM,CASM)

Othermetricsaslisted/applicable

Sameinformationasintheregionalfinancial

summarysection,spiltbybusinessmodel

Carrierscategorizedasfull-serviceorlower-cost(whichincludesultra-low-costandvaluemodels)

Capacityincludesavailableseat-miles,seats(gauge),distance(stage),fleetsize,

andutilizationmetrics

Scope

Index1ofselectcarriersbasedineachregion

Index1ofselectcarriersbasedineachregion

Allcarriersbasedineachregion

ofreporting

(seeappendixforadditionaldetail)

NOTE:Africa/MiddleEast/Indiaregiondoesnot

haveenoughcarrierdatatocreateanaccurate

comparableindex.Thisquarterwehaveincluded

IMEAairlineswithavailabledataintheappendixofthisreport

(seeappendixforadditionaldetail)

thatpublishschedules

Where

wegetdata

CapIQ,carrierearningsreleases,OAG

Macro-economicdatafromOxfordEconomicsandUSEnergyInformationAdministration

Anyothersourcesarenotedasapplicable

CapIQ,carrierearningsreleases,OAG

Macro-economicdatafromOxfordEconomicsandUSEnergyInformationAdministration

Anyothersourcesarenotedasapplicable

Capacity:OAG,AWIN

Note:1.Wecreateregionalindicesbecausetimelyandaccuratereportingisnotavailableforallcarriers.Westrivetomakeeachregionalindexrepresentativeoftheregionbroadly,byincludingthemostrelevantcarriersfromamixofbusinessmodelswhosedataisregularlyavailable.Theappendixincludesalistofcarriersweuseineachindex

?OliverWyman5

FORWARD

SECONDQUARTER2025INDUSTRYREVIEW

Worldwideairlineindustryeconomicindicators

World:99%

Inthisinstallment(subscribehere),wereviewsecondquarter2025resultsfortheairline

Operating

margin2Q2025

Forcarriersinglobalindex

industryworldwide:

107%

?WorldwidenominalGDPgrew2.9%year-over-year,withmostregionaleconomiesgrowingduringthesecondquarter

InsufficientData

comparedtothebeginningof2025

98%

?Theairlineindustry1grewcapacity

110%

globally5.1%,realized7.7%revenuegrowth,andproducedanoperatingmarginof9.9%

?Operatingcostsincreased2.5%(CASM),

slightlyhigherthanrevenuegrowthof2.4%(RASM)

?Astheworldexperienceseconomicand

tradeuncertainty,wemorecloselyexaminerecenttrendsacrossmarkets

Verybest,

TomStalnakerKhalidUsman

GrantAlport

AndyBuchananAaronTaylor

Q2year-over-year

Forcarriers

inglobalindex

Region

RASM

CASM

OpMargin(pts)

NorthAmerica

-1.7%

0.2%

-1.73

Europe

13.0%

10.1%

2.33

LatinAmerica

-3.5%

-1.8%

-1.54

Asia/Pacific

2.5%

0.6%

1.71

World

2.4%

2.5%

-0.10

Note:1.Asmeasuredbyourglobalindexofairlines,seeappendixfordetails;AllearningsarereportedinUSD

Globaloverview

?OliverWyman7

INDUSTRYFINANCIALRESULTS:GLOBALAIRLINEINDEX

10%MARGINON5%CAPACITYGROWTH;CASMGROWTHSLIGHTLYHIGHERTHANRASM

Airlinesinourworldwideindexproduced

anoperatingmarginof9.9%,downslightly

fromsecondquarter2024.Expensegrowth

slightlyoutpacedrevenuegrowth,resultinginslightlylowermargin.

?Allregionsinourindexwereprofitable,andsawYOYdeclinesinmargin

?Americassawthelargestmargindecline,whileEuropesawthelargestincrease

?AmericashadthelargestRASMdeclines,withEuropeconsiderablyoutpacingotherregions

?LatinAmericasawCASMdeclineYOYwhile

EuropesawthelargestCASMincrease;otherregionsremainedrelativelyflatinCASMYOY

?Europehadthehighestmargin,RASM,andCASMincreases—largelydrivenbythe

increasedEUR/USDexchangerateoverthelastyear

Q2financialandcapacitygrowthstatisticsfortheglobalindustry

YOYcapacitychange(ASMs)

World:9.9%

OpMargin

8.8

10.7%

8.9%

7.4

5.1

Asia/PacificLatinAmericaandCaribbean

World

t

4.2

9.8%

11.0%

Europe

3.3

UnitedStatesandCanada

InsufficientData

SummaryofYOYchangeinfinancialmetrics

Q22025vs.Q22024

Region

Revenue

Expense

RASM

CASM

OpMargin(pts)

NorthAmerica

1.6%

3.5%

-1.7%

0.2%

-1.73

Europe

17.7%

14.7%

13.0%

10.1%

2.33

LatinAmerica

3.6%

5.5%

-3.5%

-1.8%

-1.54

Asia/Pacific

11.6%

9.5%

2.5%

0.6%

1.71

World

7.7%

7.8%

2.4%

2.5%

-0.10

Source:CapIQandcarrierearningsreleases;.CapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion.

?OliverWyman8

INDUSTRYUNITECONOMICDRIVERS:GLOBALAIRLINEINDEX

NORTHANDLATINAMERICASAWRASMGROWTHLOWERTHANCASMGROWTH

Unitrevenue(RASM)growth

Year-over-yeargrowthin%,bubblesizedenotescapacity

Revenue

20

18

16

14

12

10

8

6

4

2

0

-2

-4

-6

Europe

RASMgrowth

Asia/Pacific

RASM

decline

World

LatinAmerica

NorthAmerica

0123456789101112

Capacity

Unitcost(CASM)growth

Year-over-yeargrowthin%,bubblesizedenotescapacity

Cost

18

16

14

12

10

8

6

4

2

0

-2

-4

-6

Europe

CASMgrowth

Asia/Pacific

World

CASMdecline

LatinAmerica

NorthAmerica

EuropeRASM/CASMgrowth

drivenlargelybyEUR/USD

exchangerateincreaseby~9%

0123456789101112

Capacity

Source:CapIQandcarrierearningsreleases;.CapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion

?OliverWyman9

MACRO-ECONOMICINDICATORS:WORLDWIDE

REVENUEGROWTHANDDECLININGFUELCOST,WITHPOSITIVEECONOMICOUTLOOK

GlobalGDPgrewbyabout3%andrevenuegrewby7.7%againstabackdropofgrowingconsumerspendingandlowerfuelcost.

NorthAmericaEuropeLatinAmericaAsia/PacificAfrica/ME/IndiaWorld

Year-over-yearpercentchange

■Spending■

7.67.0

inpersonalspendingandincome(2025Q2vs.2024Q2)

4.84.2

NorthAmericaEuropeLatinAmericaAsia/PacificAfrica/ME/IndiaWorld

?Worldwide,realGDPgrew2.9%YOY

?Consumerspendinganddisposableincomeincreasedingeneralandacrossallregions

–LatinAmericaexperiencedthelowestgrowthatabout1%

?Averagecostpergallonofjetfuel

dropped13%andisnearing$2pergallon

?Themoderatedeclineinjetfuelcost

continuestomaskothercostgrowthatworldwideairlines

Year-over-yearpercentchangeintotalairlinerevenueandrealGDP(2025Q2vs.2024Q2)

■AirlineRevenue■GDP

17.7

11.6

7.7

DisposableIncome

5.2

4.84.24.4

4.73.1

1.01.3

3.8

3.62.7

4.63.9

1.8

1.6

1.0

2.9

Fuelprice(USDpergallon)

2025Q2$2.09

2024Q2

$2.39-13%

5

0

Jul-2020Jan-2021Jul-2021Jan-2022Jul-2022Jan-2023Jul-2023Jan-2024Jul-2024Jan-2025Jul-2025

Source:Oxford,CapIQandUSEnergyInformationAdministrationdata.Financialfiguresunadjusted(nominal)..Africa/ME/IndiaexcludesEmirates/Qatar/Etihadasthesecarriersdonotreportatquarterlylevel

?OliverWyman10

GLOBALOPERATINGMARGINSBYAIRLINE

GLOBALMARGINAT10%;SIMILARGROWTHACROSSREGIONS

Airlineoperatingmargins–Q22025

NetworkCarrierValue/LCCCarrier

Asia/Pacific:10%

LatinAmerica:11%

IMEA:12%

Europe:11%

NorthAmerica:9%

21%

21%

22%

19%

19%

17%

17%

17%

16%

14%

13%

12%12%

12%

12%

11%

10%

9%9%

9%

9%

8%

7%7%

7%

6%

6%

6%

4%4%

3%

2%2%

1%

1%

1%

0%

0%

-1%

-3%

-12%

Delta

United

Alaska

American

AirCanada

Allegiant

SunCountry

Southwest

JetBlue

Frontier

Copa

Aeromexico

LATAM

VivaAerobus

Azul

Volaris

Ryanair

IAG

easyJet

Norwegian

AFKLM

Finnair

WizzAir

Lufthansa

Thai

EVA

Vietnam

JAL

Qantas

ANA

Korean

Hainan

ChinaSouthern

ChinaEastern

AirNewZealand

Asiana

AirArabia

Pegasus

IndiGo

ElAl

Turkish

Note:Regionalmarginsweightedbytotaloperatingrevenueandexpenses;notallIMEAcarriersreportquarterly

airline

performance

byregion

NorthAmerica

OverviewofregionaltrendsforUS/Canada

INDUSTRYFINANCIALRESULTS:NORTHAMERICAINDEX

CAPACITYGROWTHANDDECREASEDDEMANDCONTRIBUTETOLOWERPROFITABILITY

NorthAmericaprofitdroppedbynearly15%ascostgrewfasterthanrevenue,whichfailedtokeeppacewithcapacity.

?Revenuegrowthof1.6%wasoutpacedbycostgrowthof3.5%

?CostgrowthwassimilartocapacitygrowthresultinginslightCASMincrease(+0.2%)

?CASMincreaseddespite13%reductioninfuelcosts

?Revenuegrewatabouthalftherateof

capacityresultingina1.7%RASMdecline

?Ascapacitygrowthoutpaceddemand,averagefaresdecreasedby6.2%

?InternationalvisitationtotheUScontinuedtobenegativeyear-over-year,especiallyinvisitationfromLatinAmericaandthe

Caribbean

YOYchangeinfinancialstatisticsfortheNorthAmericanindustry

2025Q2vs.2024Q2

3.3%3.5%

1.6%

-14.9%

ASMTotalRevOp.ExpenseOp.Profit

FinancialstatisticsfortheNorthAmericanindustry

2025Q2vs.2024Q2

-1.7%

+0.2%

-1.7ppt

10.7%

8.9%

18.518.216.516.6

Op.Margin

RASM(cents)CASM(cents)

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapIQandcarrierearningsreleases;.SomecapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion.

?OliverWyman13

?OliverWyman14

FINANCIALRESULTSBYBUSINESSMODEL:NORTHAMERICAINDEX

FSCANDLCCMAINTAINPROFITABILITYDESPITEDECREASEDMARGINS

Full-servicecarrierscontinuedtoproduce

highermarginsthanlower-costcarriers,andhadsmallermargindeclinesaswell.

?Operatingmarginwas10.4%forFSCs,

considerablyhighcomparedto1.9%forFSCs,thoughbothdecreasedYOY

?Full-servicecarriers’capacitygrewataratefourtimesfasterthanforlowercostcarriers

?Despitefastercapacitygrowth,full-servicecarrierssawlessRASMdeclinethatlower-costcarriers(-1.6%vs.-2.6%)

?BothgroupsofcarriersmaintainedrelativelyflatCASM

FinancialstatisticsfortheNorthAmericanindustry

-1.6%

+0.3%

-1.7ppt

4.2%

4.0%

2.3%

12.1%

19.619.217.217.2

10.4%

-12.0%

CASM(cents)

RASM(cents)

Op.Margin

ASMTotalOp.Op.

RevExpenseProfit

-2.6%

-0.4%

-2.2ppt

4.0%

0.9%

0.6%

14.814.414.214.2

-1.7%

1.9%

-54.7%

RASM(cents)CASM(cents)

Op.Margin

ASMTotalOp.Op.

RevExpenseProfit

2025Q2vs.2024Q2

Full-servicecarriers

Value/LCC

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapIQandcarrierearningsreleases;.SomecapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion

?OliverWyman15

PRODUCTIONREVIEW:NORTHAMERICATOTALINDUSTRY

CAPACITYGROWTHDRIVENBYASMANDFLEET

Fleetgrowthwastheprimarydriverof

increasingcapacityassomeefficiencymetricsfellwhilecarriersslowedcapacitygrowth

throughtheperiod.

?Capacitygrewby3.3%overallwith

sequentialmonthlyyear-over-yearratesfallingfromlateQ1throughQ2

?Fleetsizegrewby3.3%

?Flighthoursperaircraft-dayincreased1.4%onflatcycleutilizationandslightlyshorterstagelength(distanceflown)

–Morehoursonsamedeparturecountandshorterstagesuggestslongeraverage

blocktimes

?Gauge(averageseats)declinedby1.5%

Q2capacityproductionforallscheduledairlinesinregion

-0.2%

Mainline

-1.5%

913912

133131

Gauge(seats)

Stage(miles)

+3.3%

7,3767,617

0.0%,

3.63.6

Fleet

Cycles(PerDay)

+3.3%

415429

ASMs(BN)

+1.4%

7.87.9

FlightHours(perday)

Q22024Q22025●PositiveImpact●NegativeImpact

Source:CapacityfiguresbasedonOAGscheduledataviaPlaneSandincludeallscheduledairlinesinregion(notlimitedtocarriersinstudy).FleetdatabasedonOliverWymanVectordata.NetworkdatabasedonOliverWyman'sNetPlanmodel

LatinAmerica

OverviewofregionaltrendsforCentral/SouthAmerica

?OliverWyman17

INDUSTRYFINANCIALRESULTS:LATINAMERICAINDEX

MARGINDOWNONSUBSTANTIALCAPACITYGROWTH

InLatinAmerica,marginfellby1.5pptson7%highercapacitywhileRASMdeclinesoffset

improvementinCASM.

?Theregionremainedprofitablewithan11%margin,downfrom12.6%

?RASMdeclined3.5%ona7.4%capacityincreaseand3.6%revenueincrease

?CASMdeclinedby1.8%asexpenseincreased5.5%onthe7.4%capacityincrease

YOYchangeinfinancialstatisticsfortheLatinAmericanandCaribbeanindustry

2025Q2vs.2024Q2

7.4%

5.5%

3.6%

-9.0%

ASMTotalRevOp.ExpenseOp.Profit

FinancialstatisticsfortheLatinAmericaandCaribbeanindustry1

2025Q2vs.2024Q2

-1.5ppts

12.6%

11.0%

Op.Margin

-3.5%

-1.8%

12.411.910.810.6

RASM(cents)CASM(cents)

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapIQandcarrierearningsreleases;.SomecapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion

?OliverWyman18

FINANCIALRESULTSBYBUSINESSMODEL:LATINAMERICAINDEX

FSCANDLCCSTILLREMAINPROFITABLE;LCCPROFITABILITYDOWNCONSIDERABLY

Full-servicecarriersexpandedtheirmargingapwithlower-costcarriersprimarilythrough

continuedclosingoftheCASMgap.

?Full-servicecarriermarginincreasedby2.1pptsto15.3%

?Lower-costcarriermargindeclinedby10.6pptsto0.3%

?RASMdeclinedforbothgroups,butataslowerrateforfull-servicecarriers

?CASMdeclinedforfull-servicecarriers(-4.5%)andincreasedforlower-costcarriers(+5.2%)

?Full-servicecarriersgrewcapacitymore

slowly,at6.3%(versus9.4%forlower-cost)

FinancialstatisticsfortheLatinAmericanandCaribbeanindustry

-2.2%

+2.1ppt

-4.5%

20.1%

15.3%

13.513.211.711.1

13.3%

6.3%

3.9%

1.5%

RASM(cents)CASM(cents)

ASMTotalOp.Op.RevExpenseProfit

Op.Margin

2025Q2vs.2024Q2

Full-servicecarriers

Value/LCC

15.1%

9.4%

2.8%

-97.5%

ASMTotalOp.Op.

RevExpenseProfit

-10.6ppt

10.8%

0.3%

Op.Margin

-6.0%

+5.2%

10.39.79.29.6

RASM(cents)CASM(cents)

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapIQandcarrierearningsreleases;.SomecapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion

?OliverWyman19

PRODUCTIONREVIEW:LATINAMERICATOTALINDUSTRY

CAPACITYGROWTHDRIVENBYFLIGHTHOURSANDFLEET

Capacitygrowthwasachievedthrougha

combinationoffleetandefficiencygrowth.

?Mainlinecapacitygrew5.7%

?Mainlinefleetgrewby4.1%

?Increasingefficiencydrovetheremaining1.6pptsofgrowth:

–Flighthoursperaircraft-dayup5.9%

–Cycleutilizationup1.5%

–Gaugeandstagebothincreasing

Q2capacityproduction

Mainline

+0.9%

148150

Gauge(seats)

+4.1%

1,6691,738

Fleet

Q42023Q42024●

+1.6%

768781

Stage(miles)

+1.5%

4.04.0

Cycles(PerDay)

PositiveImpact●NegativeImpact

+5.7%

117124

ASMs(BN)

+5.9%

7.37.7

FlightHours(perday)

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapacityfiguresbasedonOAGscheduledataviaPlaneSandincludeallscheduledairlinesinregion(notlimitedtocarriersinstudy).FleetdatabasedonOliverWymanVectordata.NetworkdatabasedonOliverWyman'sNetPlanmodel

Europe

OverviewofregionaltrendsforEurope

?OliverWyman21

INDUSTRYFINANCIALRESULTS:EUROPEINDEX

REVENUEANDCOSTGROWTHOUTPACESCAPACITYCONSIDERABLY

OperatingmarginatEuropeanairlines

increased,withtheregionexperiencing

considerableincreasesinRASMandCASM.

?RASMincreased13.0%to18.4centsas

revenuegrowthoutpacedcapacitygrowth

?CASMincreasedbyslightlylessthanRASMat10.1%

?Revenuegrowthoutpacedoperatingexpensegrowth,leadingtoa2.3pointimprovementinmarginof10.7%

?HighYOYrevenuesandcostswerelargelydrivenbytheincreasedexchangerate

betweentheeuroandUSdollar(1.07in

2024comparedto1.17in2025)

YOYchangeinfinancialstatisticsfortheEuropeanindustry

2025Q2vs.2024Q2

50.5%

4.2%

17.7%

14.7%

ASMTotalRevOp.ExpenseOp.Profit

FinancialstatisticsfortheEuropeanindustry

2025Q2vs.2024Q2

+13.0%

+10.1%

+2.33ppt

10.7%

14.9

8.4%

16.318.416.5

Op.Margin

RASM(cents)CASM(cents)

Q22024Q22025PositiveImpact●NegativeImpact

Source:CapIQandcarrierearningsreleases;.SomecapacityfiguresbasedonOAGscheduledataviaPlaneS.Seeappendixforcarriersincludedbyregion

?OliverWyman22

FINANCIALRESULTSBYBUSINESSMODEL:EUROPEINDEX

FSCANDLCCMARGINSPOSITIVE;LCCMARGINSCLOSETO18%

BothFSCsandValue/LCCswereableto

3.9%

16.1%

14.5%14.4%

4.3%4.3%

18.820.7

18.019.8

Full-servicecarriers

ASM

TotalOp.Op.RevExpenseProfit

Op.Margin

RASM(cents)

CASM(cents)

63.3%

17.4%

13.0%

+16.2%

1