S&P Global Ratings expects activity in the U.S. transportation sector will continue to normalize in 2025, with growth rates for most modes of transportation slowing to levels comparable with pre-pandemic averages, following more rapid growth in 2024. We believe activity across most modes of transportation will continue to steadily increase from 2025-2027, with average annual growth rates of 2.8% for enplanements, 6.3% for transit ridership, 1.0% for port containers, and 1.5% for vehicular traffic.

Our estimates are based on industry trends, discussions with various management teams, and S&P Global Economics' view for the upcoming year. Higher volumes largely outweighed increased costs in 2024, even as transportation infrastructure enterprises (TIE) passed on their higher expenses to tenants and users via higher fees, charges, fares, tariffs, and tolls. Favorable revenue performance due to management's willingness and ability to raise rates and demand recovery boosted financial performance, resulting in improved credit quality across the sector.

Our updated activity estimates show public transit ridership potentially plateauing at about 90% of pre-pandemic levels by 2027 (absent outside influences that could stimulate transit ridership, such as employers limiting their employees from working from home and congestion pricing), and enplanements, port containers, and vehicular traffic remaining above pre-pandemic levels for 2025-2027, reaching 113%, 113%, and 106% of pre-pandemic levels, respectively, by 2027.

For further details see "U.S. Not-For-Profit Transportation Infrastructure 2023 Medians: Demand And Revenue Growth Improved Financial Medians To Post-Pandemic Highs," published Nov. 12, 2024, on RatingsDirect).

Our U.S. Economic Forecast Is Mixed, With Murky Policy Waters Ahead

The U.S. economy continues to expand at a solid pace heading into 2025, although inflation is likely to be above the Federal Reserve's 2% target for longer than previously anticipated. S&P Global Ratings' recently updated U.S. economic forecast for 2025 incorporates an expected slight cooling of real GDP growth to 2.0% from an estimated 2.7% for 2024, which we believe will continue to slow growth in demand measures to rates comparable with pre-pandemic averages, though not enough to negatively affect operations or financial performance across transportation modes. S&P Global Ratings' annual average real GDP growth forecast for 2025 and 2026 is 2.0% each year (up from 1.8% and 1.9%, respectively). Consumer spending will likely continue to climb at a solid pace, 2.3% and 2.0% in 2025 and 2026, respectively, after rising an estimated 2.6% in 2024. Chart 1 shows the forecast of various key economic indicators we considered in arriving at our activity estimates.

Chart 1

We expect oil prices to remain between $65-$75 per barrel of West Texas Intermediate and gasoline prices to remain relatively level, as the incoming administration's pro-energy policies will only serve to continue record domestic oil and gas production in the U.S. High domestic energy production is correlated with lower fuel prices, underpinning our forecast for continued, albeit slow, growth in the toll road, port, and airport sectors.

A continued rise in the cost of living could influence some city residents to opt for mass transit in place of other forms of transportation, such as ride-hailing services and car ownership, underpinning our forecast for further recovery in mass transit ridership.

Trade-tariff proposals carry significant uncertainty, from the size and scope of the duties to corresponding economic impacts. In our baseline scenario, an effective tariff rate on Chinese imports rises to 25% in 2025 from an estimated 14% in 2024. This is likely to add 0.1-0.3 percentage points to annual U.S. inflation in the first year, depending on the amount passed through from importers to final consumers. For more information, see "Economic Outlook U.S. Q1 2025: Steady Growth, Significant Policy Uncertainty," Nov. 26, 2024.

Most Modes Have Fully Recovered, While Mass Transit Finds A New Baseline

Chart 2 shows median activity levels from 2019 through 2023 and estimates for 2024 through 2027 with a comparison to 2019 as a pre-pandemic benchmark.

Chart 2

We used data from the Bureau of Transportation Statistics and S&P Global Market Intelligence to develop our estimates for 2024-2027. We derived our estimated annual growth rates by comparing recent actual performance data across four activity measures (enplanements, unlinked transit trips, port container activity measured in twenty-foot equivalent units [TEUs], and vehicle miles traveled) and analyzing movements in year-over-year growth since 2010.

• Air travel demand's full recovery in 2023 informed our estimates, which show continued but slowing growth supported by the segment of the U.S. population that has a high propensity to travel by plane for business or leisure purposes. Nevertheless, a key headwind facing the airport sector is the ongoing delays on deliveries of new aircraft, which reduce available seats and airport throughput. In the interim, airlines have attempted to counteract these constraints by replacing smaller planes with larger ones. We're also monitoring labor shortages that could force airlines to cut less profitable routes.
• Generally stable vehicular traffic trends informed our estimates, which assume that both auto travel and transportation of goods by commercial vehicles will remain relatively strong, benefiting toll roads. With less demand for employees to be in their offices five days a week, some workers have moved out of major cities into more affordable areas that might not have convenient public transportation options. This change could, in turn, spur further reliance on cars and toll roads for access to urban centers.
• Port activity levels generally move in line with the broader U.S. economy, which we currently expect will slow over the next few years. S&P Global Market Intelligence estimates 6.5% growth in U.S. exports and 11.2% growth in U.S. imports (as measured in TEUs) for 2024. In 2025, however, imports are forecast to fall before resuming growth at much lower levels in further outyears. Factors informing our view of a stagnating port sector include unstable trade relations and tariffs proposed by the incoming administration, which could reduce demand for ports. The closely linked risk of retaliatory tariffs or other trade restrictions by U.S. trading partners could reinforce the reduction in port activity levels.
• Mass transit remains the outlier among TIE issuers, with estimated 2024 activity only about 75% of 2019 levels. Given its more significantly depressed base, we believe that mass transit has capacity to grow at a faster rate than other modes of transportation. Our activity estimates now show ridership recovering to 80% in 2025, 85% in 2026, and 90% in 2027. Given secular changes in the usage patterns of mass transit passengers, we believe it's possible that the mass transit sector could be approaching a new baseline. In our view, additional recovery will be fueled by demographic shifts over the longer term or actions taken by local policymakers, such as imposing congestion pricing to induce increased usage of mass transit. Our view of the mass transit sector is also heavily influenced by lasting changes to the workplace landscape following the rise of remote work.

Economic And Return-To-Office Policy Decisions And Geopolitical Issues Could Dampen Or Enhance Activity

Below we have identified several factors that could cause activity levels to differ from our estimates.

Economic policies of the incoming administration could dampen air travel and port activity.  The incoming administration's economic policies could result in higher inflation, potentially eroding purchasing power and discretionary income, taking unnecessary travel and spending off the table for many U.S. households, thereby dampening air travel demand and port activity. Depending on final implementation, tariff hikes could reduce demand for foreign goods that travel through U.S. ports. Importers are likely to pass on at least part of the additional costs to end consumers, which we expect would hurt demand. There is also the risk of retaliatory tariffs reducing foreign demand for U.S.-made goods, which would further dampen port activity.

Limiting work-from-home and other policies could improve transit ridership recovery.  We believe many employers will continue to provide remote work options for their employees in some capacity, although five years on from the start of pandemic many employers are tightening up their in-office work policies, which we believe has a material impact on public transit ridership. Drastically limiting how frequently employees can work from home would increase mass transit usage. Other policies, such as congestion pricing, which is in nascent stages in the U.S., could also induce the use of mass transit.

Ongoing geopolitical instability and higher fuel prices could affect the TIE sector.  The ongoing Russian-Ukraine conflict, the Israel-Hamas war, and tense relations between the U.S. and China could result in price shocks for commodities or cause supply-chain disruptions. In addition, higher fuel prices on top of the risk of softened demand, spurred by other general economic factors, could affect the TIE sector in 2025 and beyond.

Related Research

• U.S. Not-For-Profit Transportation Infrastructure 2025 Outlook: Tariffs May Rock The Boat As The Sector Stays On An Even Keel, Jan. 9, 2025
• U.S. Not-For-Profit Transportation Infrastructure 2023 Medians: Demand And Revenue Growth Improved Financial Medians To Post-Pandemic Highs, Nov. 12, 2024
• U.S. Transportation Infrastructure Transit Update: Sector View Now Stable As Dedicated Tax Growth Mitigates Lower Ridership Revenue, Sept. 11, 2024
• U.S. Transportation Infrastructure Airport Update: Air Travel Rides The Jetstream, For Now, June 18, 2024