Geopolitical and economic factors continue to affect whether and how aviation executives prioritize decarbonization, with a number of active geopolitical and trade challenges as of 2025

 

The World Economic Forum’s survey of aviation executives also asked respondents to rank wider risks, beyond immediate aviation-specific sustainability concerns, that are affecting progress on decarbonizing the sector. Challenges identified include risks arising from policy and geopolitics, economics, technology and social issues (see Figure 11).

 

According to the executives consulted, geopolitics tops the list of non-sustainability challenges affecting aviation decarbonization progress. The Forum’s Global Risks Report 2025 also highlights geopolitics as one of the key concerns for the international community. The previous chapter highlights risks and challenges specific to the aviation sector and SAF feedstocks. This report addresses wider dynamics that can affect relationships and negotiations between countries, including at COP30 and the ICAO General Assembly later this year, as well as trade flows and thus aviation and cargo movements. At the time of writing in early 2025, the impacts of the US withdrawal from the Paris Agreement and its “America First” trade policy are being closely monitored by the aviation community. The risk of increased protectionism and escalating tariffs across the economy continues a trend already seen in 2024, when both the US (under the Biden administration) and the EU introduced a number of measures in relation to Chinese solar panels, electric vehicles and electric vehicle batteries. Experts interviewed believe that geopolitical tensions are driving insecurity on feedstock exports, while increasing the prioritization of domestic energy security agendas at a time of global uncertainty. Meanwhile, the use of incentives to accelerate domestic industrial development has led to increased scrutiny by the international community around fairness and competitiveness. For example, the EU investigated Chinese biodiesel, which imposed anti-dumping duty rates for biofuels, but left out SAF.

Change in governments 

Following a “super-year for elections” across the world – including in the US, India, United Kingdom and South Africa – respondents expressed concern about changing government priorities, leading to potential U-turns on policy and regulation, as well as doubt around the longevity of incentives. While in some cases changes in government have resulted in a greater prioritization of the aviation decarbonization agenda (e.g. in the UK, according to executives interviewed), this has not necessarily been the case across all regions. This year sees the continuation of the election cycle in Australia (where the government has been increasingly supportive of sustainable aviation and fuels policy, and is hoping to host COP31), Canada, Chile, Germany and Singapore – as well as midterm elections in Argentina.

 Interstate armed conflict 

Ongoing conflicts across the world, in particular following Russia’s invasion of Ukraine, continue to have an impact on airspace closures and climate change, as well as on aviation safety. Longer routes arising from the closure of Russian airspace have led a number of carriers to pull out of Asian markets, citing longer and less attractive journeys for passengers, as well as increased fuel costs and revenue losses. The climate impact of diverting civil aircraft traffic around Russia has been quantified at 24 million tonnes of CO2 -equivalent, around 14% of the total climate impact of the war in its first two years. At the same time, Chinese carriers that can continue to use Russian airspace have increased their presence across Europe-Asia routes. In 2024, several European carriers complained about increased competition from Chinese carriers and their growing market share – for example, Chinese carriers are now running nearly three-quarters of all flights between China and France and Germany, as well as nearly all flights between China and the United Kingdom and Italy. This increasing activity has prompted Western airlines to push for caps to flights to and from China, although as of February 2025 no additional restrictions have been implemented, at least in Europe. Air traffic restrictions and diversions have also affected the Middle East, with a number of carriers avoiding Iranian airspace and cancelling flights to Tel Aviv throughout 2024. Conflict developments, both in Ukraine and across other active war zones, will continue to generate a volatile and disrupted environment, with many executives not expecting airlines to resume routes until after such situations stabilize. On top of the implications of re-routing and increased competition on carriers’ offer and profitability, from a sustainability standpoint it remains to be seen whether greater penetration of extra-EU carriers in Europe may bring about other impacts in 2025: many of these long-haul routes are currently excluded from mandates and emissions trading schemes, leaving SAF use on such journeys up to the voluntary action of airlines.  

  

Bankability and attractiveness for investors 

One of the key concerns voiced by respondents to the Forum’s survey was that the aviation sector is not viewed by the financial community as an investment priority, despite needing at least $20 billion of capital investment to meet ICAO’s 2030 vision and over $5 trillion to get to net zero. While

Within the aviation sector, there are also multiple technologies looking to secure funding, including SAF, hydrogen and, increasingly, eVTOLs (electric vertical take-off and landing aircraft). While potentially attracting a different pool of investors and risk appetite, eVTOL companies gained significant momentum in 2024, with $2.3 billion raised in 2024 and over $13 billion raised since 2019,80 as well as a number of orders from airlines. The latest eVTOL transactions include: $894 million of investment in Joby Aviation from Toyota Motor Corporation in 2024; a $430 million investment in Archer Aviation from a group of investors including United Airlines and Stellantis; a $50 million boost to Vertical Aerospace;83 and a $114 million investment in Lilium in early 2024. However, Lilium did not secure a loan guarantee from the German government in November 2024 and declared insolvency, but eventually received a capital investment of $200 million in December 2024 to resume work.

Despite significant investment, there are still technology challenges, risks and regulatory pressures affecting the progress of eVTOLs. Alongside the profile of the investor, these challenges will ultimately determine whether eVTOL start-ups could scale-up alongside other SAF, CDR or zero-emission propulsion technologies, at a time where investment in all these pathways is critically needed to remain on track to deliver net-zero aviation by 2050.

  

While sustainability remains a key priority for the aviation industry, 2024 saw an increasing number of economic challenges affecting the sector’s focus on its net-zero agenda. The degree to which these affect decarbonization varies, but many of the executives surveyed and interviewed flagged a range of priorities they are grappling with that may limit their bandwidth or capital for decarbonization projects. 

Inflation, revenue and growth

 The International Monetary Fund expects global headline inflation to decrease to 4.2% in 2025, with global growth forecast to be at 3.3% for both 2025 and 2026. While inflationary pressures have been easing and overall concerns across the global economy are decreasing, according to the Forum’s Global Risks Report 2025, the global economic outlook remains a key worry for many of the aviation executives consulted. Facing adverse market conditions and some COVID-19 leftovers, several of the executives interviewed, in particular airport CEOs, mentioned economic profitability as a greater priority than sustainability. This point was particularly highlighted by executives from aviation hubs in emerging markets in Latin America, the Middle East and Southeast Asia. Passenger numbers, however, remain encouraging. Airports Council International (ACI) World estimates that 2019’s traffic levels were finally surpassed in 2024, with 9.5 billion passengers (104% of 2019). Asia Pacific and European carriers were the primary contributors to the net increase in traffic, while North American carriers experienced a significant rise in demand and other regions continued to see steady market expansion. The overall profitability of airlines is increasing according to IATA, with an expected combined net profit of $30.5 billion in 2024 and bullish growth forecasts to 2050, especially in emerging aviation markets such as China and India. While profit is going up, several stakeholders mentioned that costs are also increasing. On average, despite some volatility, jet fuel costs have remained fairly stable throughout 2024, but rising labour costs and workforce and supply chain bottlenecks, alongside regulatory uncertainty, have been mentioned as key areas of concern for executives. Some of these factors, together with demand, are combining to push airfares up, with an average year-on-year increase in US airfares of 8% in 2024. Despite this short-term increase, IATA reported that domestic airfares in the US, China and India were still close to or below 2015 levels, following an overall long-term downward trend, with more volatile ticket prices for international trips. Market commentators are expecting airfares to continue rising in 2025, potentially climbing by as much as 20% in the first half of the year. As a result, airlines’ revenues in 2025 are expected to surpass the $1 trillion milestone for the first time, with a forecast net profit of $36.6 billion – a record high for the industry. With airfares increasing, some of the airlines surveyed by Airports of Tomorrow were concerned about the prospect of passing on the additional cost of SAF to passengers, on top of any non-fuelrelated price hikes. However, there was also greater acceptance that a SAF premium could work, if it were applied consistently and equally across carriers. In terms of market consolidation, last year saw a number of acquisitions and new partnerships aimed at growing and strengthening the financial position of the carriers involved. Alaska Airlines completed the purchase of Hawaiian Airlines, following a regulatory green light, while the sale of ITA Airways to Lufthansa Group was also finalized. This trend is expected to continue in 2025, with the Gol-Azul merger plan approved by the Brazil government. Some of the executives surveyed for this report consider consolidation and partnerships to be key strategies to boost financial profitability, in turn enabling future investment in new technology. However, they also highlighted how such discussions could temporarily pause carriers’ prioritization of the decarbonization agenda until the financial implications of mergers, consolidations, restructurings and acquisitions are completed.

As passenger numbers grow, some airports are looking to expand and new airlines are launching to capture a share of this increasing demand. The expansion of Dubai World was announced in April 2024, with the aim to operate five runways and become the largest hub in the world. Meanwhile, Saudi Arabia announced the construction of a new airport in Riyadh with six runways, a new $50 billion investment in the country’s airports and the launch of a new carrier, Riyadh Air. Asia Pacific is also looking to grow. Hong Kong International Airport (HKIA) inaugurated its third runway in November 2024. With cargo movements increasing as well as passenger numbers, DHL Express inaugurated new facilities at HKIA in April, with its HK$1.5 billion fully automated sorting system. In North America, Toronto Pearson Airport unveiled a renovation plan to increase capacity. In early 2025, the UK government announced its backing for a major expansion at London Heathrow, as well as the start of restructuring work at London Stansted, backed by a £1.1 billion investment from the government. The construction of a new terminal at Singapore Changi Airport is also expected to start later this year, while Melbourne Airport announced plans for a major expansion, as airlines launch new routes and connectivity to Australia is expected to increase in the year ahead. On the back of positive growth forecasts and air travel expansion announcements, 2024 also saw greater debate on how the growth of the sector can be compatible with its climate commitments. This was the focus of a paper commissioned by the European Union Joint Research Centre, published in December 2024, which predicted that aviation’s continuing growth has set it on course to triple CO2 emissions by 2050. The paper concluded that technological improvements will need to be complemented by a place-based approach to aviation decarbonization as well as communication strategies to encourage less energy-intensive travel habits. Some of the aviation and transport sector stakeholders interviewed for the World Economic Forum’s January 2025 white paper Intelligent Transport, Greener Future: AI as a Catalyst to Decarbonize Global Logistics, identified solutions powered by artificial intelligence (AI) as a potential avenue to make the transport sector both greener and more efficient, while supporting business growth.104 As aviation looks to expand, the applications of AI across the sector are wide-ranging, from more seamless management of passenger flows within the airport to greater efficiency and potentially additional carbon savings during operations. 

Some of the Airports of Tomorrow executives interviewed for this report were enthusiastic about AI as a topic of growing interest for 2025, both as a means to achieve decarbonization and to improve operations and revenue. While AI may have not yet achieved the same level of popularity as in other sectors, many stakeholders consulted were confident this will change throughout the year, with increased focus at the upcoming Dubai Airshow in November 2025.

As aviation grows and airports expand, increasing scrutiny is being focused on the environmental footprint of materials and construction processes, as well as on the overall compatibility of growth and sustainability. This is happening at a time when severe climate-driven events are increasingly impacting aviation, highlighting the rise of climate adaptation and resilience as a priority topic for some of the executives interviewed, in particular for airports. Following the heaviest rainfall on record in April 2024, flooding in Dubai and its impact on airport operations hit the headlines, but there have been several other airports and airlines impacted by climate change, such as Porto Alegre in Brazil in August 2024. A study published by ACI Latin America and Caribbean in 2024 found that over 90% of airports interviewed had experienced higher temperatures and rainfall, although only half of them have carried out or expect to complete a climate change risk assessment. This highlights the limited visibility of climate resilience in airport planning, despite its immediate consequences on operations, as well as the need for greater guidance. In this context, ACI Europe and EUROCONTROL published a short briefing in November 2024 highlighting steps aviation stakeholders can take to prepare for climate disruptions. Some Airports of Tomorrow stakeholders have started to undertake action to bolster climate resilience. These include Ferrovial, which is raising the floor of its new JFK Terminal 1 buildings to mitigate flooding and Sofia Airport’s use of heat-resistant materials for resurfacing. As severe weather events intensify, airlines are also having to adapt their operations, in particular due to increased turbulence – a recurring theme picked up by the news in 2024. Following a number of heavy turbulence episodes that entailed hospitalizations and casualties in the last year, several airlines are introducing changes to operations and onboard services. As the likelihood and frequency of severe weather events is expected to increase, some of the stakeholders interviewed expect the topic of climate resilience in aviation to assume a higher priority in executives’ agendas going forward. This is not expected to compete with or deter climate mitigation action – rather, it is seen as an opportunity for the industry to engage on the topic of aviation sustainability with a wider pool of stakeholders that may be affected by climate disruptions at airports, such as insurance companies, public transport operators and hospitality providers.

Consumer experience

Among the other priorities competing for aviation executives’ attention, both airlines and airports have flagged passenger experience as an area of focus, including before flying, with enhancements on booking systems and apps, and while travelling both on the ground and in the air. The focus of recent improvements has increasingly revolved around improving the size, comfort and offer of premium classes due to the surging demand for premium products (+43% growth in premium passengers in mid-2024 compared to a year before) and the higher proportional contribution of the segment to revenue. However, it is worth noting that this trend differs by region: North America is seeing a gradual phase-out of first class seats and affordability remains a key priority in emerging markets. Within this context, the sector has started to explore how to capitalize on the potentially higher willingness of premium or frequent flyers to pay a premium for their air travel, including for more sustainable travel choices. This has resulted in a growing trend to embed sustainability into passenger retention programmes, including through the award of bonus miles for SAF purchases as part of frequent flyer schemes for some airlines, starting from 2025.

In 2024, the aviation industry continued to face significant challenges related to labour shortages and skills gaps that are having an impact on both airports and airlines across regions (from India to Australia). Alongside pilots and cabin crew, vacancies were high for aircraft maintainers – an issue that has affected both the military and civilian sectors for several years.  As passenger numbers increase, new airlines launch and new routes open, some of the stakeholders interviewed for this report were concerned that staffing shortages could get worse in the coming years –aligning with forecasts by ICAO that the sector will need 480,000 new technicians and over 350,000 pilots by 2026. Existing and new airlines have ongoing recruitment campaigns. One example is Saudi Arabia’s new carrier, Riyadh Air, which is expected to begin operations in 2025 and is actively recruiting 700 new pilots.

Workforce shortages can pose a threat to operational readiness and safety, as the recruitment of new maintainers may not keep pace with the needs of the industry.120 In its Next generation of aviation professionals (NGAP) strategy released in 2024, ICAO identified the lack of qualified personnel as one of the key causes of low compliance with aviation safety requirements. There are also important implications on sustainability, as the turnover and number of vacancies has an impact on the retention of talent and skills at a time when new technology and sustainability practices are being embedded into airport and airline operations. The integration of AI, robotics and automation in aviation operations is creating demand for new skills, alongside changes in refuelling and safety practices as multi-fuel technology is brought into the airport environment. Looking ahead to 2025, stakeholders interviewed for this report highlighted how the aviation industry must take decisive action to address the labour shortage and skills gap to ensure future operational readiness and safety, through recruitment campaigns, streamlined certification and enhanced retention strategies, as well as through reskilling activities to ensure that future sustainability requirements can be met and opportunities leveraged by the existing workforce. As part of this, AI and automation are expected to play a key role, creating significant demand for technology-related skills, as well as uniquely human abilities such as creativity, critical thinking and adaptability. Beyond airlines and airports, stakeholders also highlighted labour shortages across other parts of the aviation and fuel value chains that can have an impact on the sector’s ability to meet its internationally agreed targets. Among the concerns flagged were shortages of engineering, procurement and construction (EPC) contractors for SAF plants – a common trend affecting many other sectors, including wind energy.

As part of the increasing need to channel more capital towards developing countries for decarbonization, support for a just transition in aviation has become a recurrent theme for governments and international organizations, including for some Airports of Tomorrow stakeholders. The just transition has been a key area of debate during international negotiations and discussions in 2024, both within ICAO and at COP29, which focused on raising climate finance for this topic. The just transition across the economy is expected to remain a key priority for the sector in 2025, in particular during the ICAO General Assembly. A key priority of the Finvest Hub proposition unveiled by ICAO in February 2025 is the prioritization of financial support to scale-up alternative fuels in developing countries. A number of recent proposals to advance the just transition across the economy will have an impact on aviation. In October 2024, the International Monetary Fund (IMF) proposed the idea of pricing the emissions of international aviation and shipping, an approach they said could raise up to $200 billion a year in revenues by 2035, which could be allocated to climate finance. Meanwhile, the Global Solidarity Levies Task Force – launched at COP28 and co-chaired by Barbados, France and Kenya – is planning to publish climate-related levy proposals across several sectors by April 2025. For aviation, the task force proposes a levy of €0.33 per litre of jet fuel for international flights, as well as a frequent flyer levy of $9 for a person’s second flight, rising to $177 for their 20th flight within the same year. These two measures would generate an estimated $140 billion per year of funding, according to the task force. Airlines expressed their reservations with these proposals during COP29; similarly, some of the executives interviewed for this report were not supportive of the measures, but expected this topic would continue to feature heavily in upcoming international discussions. Meanwhile, programmes of foreign aid to support the decarbonization of the aviation sector continued, with over 20 feasibility studies in emerging countries being taken forward by the ICAO ACT-SAF programme in 2024, with support from the United Kingdom, the Netherlands, France, the European Union and Airbus

Delivery delays and other supply chain issues in 2024 have led airlines to keep flying older airplane models, negatively affecting fuel efficiency and increasing maintenance costs. With greater fuel efficiency being a key pillar of most, if not all, airlines’ plans for net zero, this has impacted progress on decarbonization and even affected strategic goals around sustainability, as exemplified by Air New Zealand’s decision to backtrack on its 2030 carbon emissions reduction commitment OEMs have seen increased scrutiny on safety and production quality as well as some workforce disputes – these have had an impact both on the orders of new aircraft (down for Airbus and Boeing in 2024 compared to the previous year, as shown in Figure 13) and on the development of zero-carbon propulsion projects (discussed in Chapter 2). Looking at 2025, Airbus and Boeing have outlined their strategies to address these challenges, with a positive outlook for production. Additionally, Honeywell’s forecast indicates an increased demand for new business jets and stable growth for the next decade, which could positively impact both companies, as well as Comac (Commercial Aircraft Corporation of China), as they adapt to market demands and enhance their production capabilities. Comac in particular is ramping up efforts to expand its production capacity and improve its supply chain to meet increasing demand, especially from Southeast Asian countries

Delay in the rollout of new aircraft is pushing airlines to fly older and less efficient planes, often with additional costs needed to refurbish existing fleets, as demand for premium classes increases. For example, in 2024 British Airways announced plans to retain and upgrade its A380 fleet with new cabins to improve the passenger experience, while increasing the number of premium seats; meanwhile, Emirates completed the refurbishment of its A380s and started to deploy these on a greater number of routes.