(London) — Since the COVID-19 pandemic eased, air travel demand has surged back. Airports are crowded, flight schedules packed, yet many airlines — particularly low-cost carriers (LCCs) — are still grappling with profitability. Even though load factors and passenger numbers have normalized, legacy debt and financial scars from the pandemic continue to weigh on their balance sheets.
According to IATA’s mid-2025 report, the airline industry’s net profit margin globally is projected at 3.7% of revenue. However, airlines in Africa, Asia, and many European LCCs remain far below that figure. Burdened by heavy debt, volatile fuel prices, and maintenance bottlenecks, low-cost operators are struggling to restore financial health.
Europe: Wizz Air as a Case in Point
Wizz Air, once a model of LCC growth, saw a steep financial setback. For the year ending March 31, 2025, Wizz Air reported a 61.7% drop in operating profit, falling to €167.5 million versus expectations of €246 million. The sharp decline was largely driven by grounded aircraft caused by Pratt & Whitney engine issues, delays in spare parts, and rising airport costs.
The spare parts shortage limited Wizz Air’s capacity, undermining potential revenue that would have been realized if its fleet had operated fully. Idle aircraft not only generate no revenue but also incur leasing, insurance, and hangar costs.
United States: Legacy and Low-Cost Airlines Under Pressure
In the U.S., legacy carriers report high revenues but remain vulnerable to losses. American Airlines, for example, posted an operating loss of about US$270 million in Q1 2025, reversing from slim profits a year earlier. Heavy debt and labor as well as fuel costs remain persistent hurdles.
Low-cost players like Spirit Airlines and Frontier face even thinner margins, making them more exposed to input volatility. Fleet delivery delays, maintenance costs, and a fragile financial base have worsened their bottom line.
Africa: Slow Recovery
African airlines collectively posted a modest US$200 million profit in 2024 — a net margin of just 1.1%. While technically back in the black, the razor-thin profit is hardly enough to offset accumulated pandemic-era debt. Local currencies have weakened against the dollar, inflating costs for aircraft leasing, imported fuel, and spare parts. LCCs in Africa, with limited capital reserves, are particularly strained.
Asia: Growth but No Relief
Across Asia, low-cost airlines in Indonesia, the Philippines, India, and Thailand still face structural financial weakness. Despite strong passenger demand — with domestic traffic in India back to over 90% of pre-pandemic levels — carriers are squeezed by rising leasing costs, high fuel prices, and increased airport charges.
Governments’ regulatory demands for capital buffers further slow down financial recovery. Yield per passenger remains under pressure as customers remain extremely price sensitive.
Debt & Leasing Burden
The heaviest drag on LCCs remains debt. Many carriers locked into long-term aircraft leasing contracts during or shortly after COVID. Today, higher-than-expected fuel and maintenance costs have outpaced earlier projections, leaving airlines stuck with unfavorable economics.
Aircraft replacement programs are also delayed due to manufacturer backlogs, forcing operators to run older, less fuel-efficient fleets that are costlier to maintain. Fuel is the single largest expense for airlines. Post-COVID, volatility has returned, with jet fuel prices climbing due to global energy market instability. For low-cost carriers with razor-thin margins, even small fluctuations can swing results from profit to loss.
In Europe and the U.S., unions are pushing for higher wages and better working conditions. Many settlements are retroactive, adding unexpected burdens to current-year financials. LCCs, with less pricing power, are hit hardest.
Grounded aircraft are a recurring theme. Whether due to engine recalls or spare part shortages, every idle jet represents lost revenue. Yet, airlines must still pay leasing, insurance, and parking costs.
Even though passenger load factors have normalized, average ticket yields remain weak. Aggressive fare discounts and promotional campaigns keep prices low as airlines fight for market share. For LCCs, the race to the bottom on fares continues to erode profitability.
On high-demand routes, new entrants and rivals flood capacity, pushing fares even lower. Instead of maximizing profitability, many airlines are trapped in reactive pricing wars.
European carriers also face higher airport charges, carbon emission taxes, and stricter noise regulations. These factors further inflate costs at a time when revenues are barely keeping pace.
In Asia and Africa, inflation drives higher labor and maintenance costs. At the same time, weak local currencies make dollar-denominated leases and fuel imports more expensive.
While revenues are recovering, many carriers remain cash-strapped. Pandemic-era debts depleted reserves, and access to affordable credit remains limited. Weak liquidity constrains investment in growth or even routine fleet renewal.
Beyond Wizz Air and American Airlines, Spirit Airlines continues to post quarterly losses. Kenya Airways, though back in profit, still runs on thin margins. In Asia, some LCCs have suspended routes, delayed new aircraft deliveries, or even downsized staff in cost-cutting measures.
Post-COVID, global air travel demand is back, but the industry’s financial scars run deep. For low-cost carriers especially, the combination of high debt, volatile fuel, labor pressures, and weak yields makes profitability elusive. Without structural reforms, better ancillary revenue strategies, and industry-wide cost discipline, many airlines may remain in the red well beyond 2025.
