The International Air Transport Association (IATA) has reported that airlines worldwide incurred $24.5 billion in payment processing costs in 2025, highlighting growing financial pressures as transaction expenses rise faster than travel sales.

The costs were incurred on $1.05 trillion in airline sales, representing a 10.4% increase in total payment expenses compared with 2023. Over the same period, travel sales grew by 7.7%, from $977 billion, according to IATA.

The average payment processing cost reached $5 per passenger, exceeding the $4.50 net profit per passenger that IATA forecasts airlines will generate in 2026.

“The airline industry is hyper competitive, capital intensive and famously low margin. In such an environment every cost item needs to be looked at carefully. The fact that payment transaction costs are increasing faster than industry revenues is unsustainable and, despite significant technological advances, highlights the critical need for greater cost efficiency,” said Sandrine Le Borgne, IATA’s Interim Director General and CFO.

Payment fees account for most costs

IATA's analysis found that direct payment fees accounted for the largest share of the industry's total payment costs in 2025, amounting to $20.7 billion, or 84.5% of the total.

Airline operating expenses associated with payments represented a further $2.9 billion, or 11.8%. These included payment systems, delayed cash flow, staffing and compliance costs.

The remaining $900 million, equivalent to 3.7% of the total, was attributed to fraud or uncollected sales.

Payment methods also had a significant impact on transaction expenses. Card payments recorded the highest average payment fees at 2.53%, compared with an estimated overall average of 1.97%. The lowest-cost payment options carried fees of just 0.01%.

IATA promotes lower-cost payment alternatives

To address the growing cost burden, IATA is exploring several measures aimed at improving payment efficiency, including expanding access to lower-cost payment methods.

The association's 2025 Global Passenger Survey found that 29% of passengers preferred digital wallets, while 8% favoured local instant payment solutions.

IATA Pay and the IATA Financial Gateway (IFG) are among the tools designed to help airlines respond to changing passenger preferences. IATA Pay enables customers to purchase travel through local instant payment solutions and has been rolled out in 34 countries, supporting 38 payment schemes.

IFG provides airlines and travel suppliers with a platform to manage, optimise and control payments across multiple sales channels in more than 170 countries, using over 300 payment methods.

IATA is also seeking to improve transparency around agency card costs through its Transparency in Payments solution. The initiative allows airlines to establish payment policies within the IATA Billing & Settlement Plan (BSP), helping them make informed decisions on accepting agency cards compared with customer cards or alternatives such as IATA EASY PAY.

Corporate travel and payment efficiency

The association is also working with airlines and corporate customers to develop a new approach to corporate travel payments as the industry transitions towards Offers & Orders.

The initiative aims to improve payment efficiency, simplify reconciliation and provide richer data, while offering airlines and corporate customers greater flexibility in managing transactions.

Additionally, IATA has introduced the Airline Payment Framework – Management Foundation to help airlines align commercial, financial and operational priorities when evaluating payment options.

Beyond reducing costs, IATA said offering more payment choices could help airlines recover sales lost through declined transactions.

“In addition to cost-efficiency, IATA research shows that providing passengers with alternative payment methods could also have a revenue-generating impact. About one in five ancillary purchase attempts are not completed because the initial payment attempt was refused and no other method was offered. Enabling more payment options has the potential to help airlines realize some of this lost revenue,” said Le Borgne.

IATA's findings underscore the importance of payment efficiency as airlines seek to protect margins, reduce transaction expenses and improve the passenger purchasing experience. -TradeArabia News Service