US airline profitability declined in 2025 as domestic margins weakened
Figures released by the US Bureau of Transportation Statistics (BTS) show airline profitability declined in 2025 despite lower fuel costs, as rising labour expenses and weakening domestic performance squeezed margins across the industry.
US airline profitability falls despite lower fuel costs
US scheduled passenger airlines reported an after-tax net profit of $6.0 billion in 2025, down from $6.7 billion in 2024, while pre-tax operating profit fell from $13.5 billion to $11.4 billion.
The BTS figures, released on 12 May, highlight growing pressure on airline margins even as fuel became a smaller share of operating costs during the year.
Operating margin fell from 5.5% in 2024 to 4.5% in 2025, while net margin slipped from 2.7% to 2.4%.
The data suggests that lower fuel prices were insufficient to offset rising labour costs and increasing pressure on domestic airline profitability.
Systemwide operating revenue totalled $252.6 billion in 2025, while operating expenses reached $241.2 billion.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Net airline profit | $6.7bn | $6.0bn | -10.5% |
| Pre-tax operating profit | $13.5bn | $11.4bn | -15.6% |
| Operating margin | 5.5% | 4.5% | -1.0 pts |
| Net margin | 2.7% | 2.4% | -0.3 pts |
| Fuel costs share of operating expenses | 18.8% | 16.8% | -2.0 pts |
| Systemwide fuel costs | — | $40.4bn | Lower share of expenses |
| Labour costs share of operating expenses | 36.4% | 37.8% | +1.4 pts |
| Systemwide labour costs | — | $91.2bn | Increased materially |
| Domestic net income | $4.6bn | $3.2bn | -30.4% |
| International net income | $2.1bn | $2.9bn | +38.1% |
Fuel costs accounted for $40.4 billion, representing 16.8% of operating expenses, down from 18.8% in 2024. At the same time, labour costs rose to $91.2 billion, accounting for 37.8% of operating expenses, up from 36.4% the previous year.
US domestic airline profitability weakens amid pricing pressure
The sharpest deterioration came in the domestic market.
Domestic after-tax net income fell from $4.6 billion in 2024 to $3.2 billion in 2025, while domestic operating margin declined from 5.2% to 3.9%.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Domestic net income | $4.6bn | $3.2bn | -$1.4bn |
| Domestic operating profit | $9.5bn | $7.2bn | -$2.3bn |
| Domestic operating margin | 5.2% | 3.9% | -1.3 pts |
| Fuel costs share of domestic expenses | 17.1% | 15.2% | -1.9 pts |
| Labour costs share of domestic expenses | 36.3% | 37.5% | +1.2 pts |
The figures reinforce a trend that has increasingly shaped the US airline market since the post-pandemic travel boom began to normalise.
US carriers spent much of 2025 grappling with weaker domestic pricing power, excess capacity on some routes, and continued competition between full-service airlines and ultra-low-cost carriers.
While airlines maintained high passenger volumes overall, yields and margins came under increasing pressure in the domestic market.
Fuel costs within domestic operations also declined as a share of expenses, falling from 17.1% to 15.2%.
However, labour costs continued rising, increasing from 36.3% to 37.5% of domestic operating expenses.
The data illustrates how labour inflation has increasingly replaced fuel as one of the industry’s primary margin pressures.
International flying becomes US airlines’ profit engine
While domestic performance weakened, international operations provided a much stronger result for US airlines.
International net income rose from $2.1 billion in 2024 to $2.9 billion in 2025, while international operating margin improved slightly from 6.3% to 6.4%.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| International net income | $2.1bn | $2.9bn | +$0.8bn |
| International operating profit | $4.0bn | $4.1bn | +$0.1bn |
| International operating margin | 6.3% | 6.4% | +0.1 pts |
| Fuel costs share of international expenses | 23.7% | 21.5% | -2.2 pts |
| Labour costs share of international expenses | 36.8% | 38.7% | +1.9 pts |
The figures reflect the continued strength of long-haul international and premium leisure travel, particularly across transatlantic markets.
Major US airlines spent much of 2025 expanding international schedules, increasing premium seating, and investing in upgraded long-haul passenger products.
Demand for international travel has remained resilient even as domestic market conditions softened, with airlines increasingly focusing network growth on higher-yield international flying.
Several US carriers also continued refurbishing widebody fleets and expanding premium cabin offerings during the year as competition for long-haul passengers intensified.
The trend appears likely to continue into summer 2026, with airlines adding significant transatlantic capacity and continuing to prioritise international network growth.
Rising costs and fuel volatility threaten 2026 airline margins
Although the BTS figures cover 2025 performance, the data also highlights the challenges airlines may face heading further into 2026.
Domestic profitability remains under pressure, while labour costs continue to rise as airlines absorb higher wages and operational costs across their networks.
At the same time, fuel prices have become increasingly volatile following geopolitical tensions in the Middle East during 2026, creating fresh uncertainty around airline margins.
For many US carriers, international and premium travel now appear to be providing the strongest protection against a weaker domestic earnings environment.
Featured image: Cerib / stock.adobe.com
