A full recovery in airline passenger volumes in Europe has been pushed back to 2025 from 2024, the body representing European airports said on Tuesday, revising the industry’s optimistic tone about its post-COVID recovery.

The announcement from ACI Europe heralds a cautious outlook with “more negatives than positives” as Europe fears a looming recession and continues to grapple with double-digit inflation as well as the fallout from the war in Ukraine.

Euro zone inflation may have peaked but will subside so slowly that it could be years before it gets back to the European Central Bank’s 2% target, reports this month indicated.

Analysts had previously said they expected consumers to continue their holiday travels, even as they grapple with higher costs of living.

But ACI Europe and others say there were still uncertainties, including a slow recovery of business travel and further unexpected economic upheaval, that could impact the sector. For airports in particular, new government fees could prove troubling.

“We now expect the passenger traffic recovery to level off moving forwards, with the timeline pushed to 2025 before Europe’s airports finally get back to where they stood before COVID-19 hit,” said Olivier Jankovec, director general of ACI Europe.

“We expect several airport markets - especially those relying predominantly on tourism - to exceed their pre-pandemic passenger volumes as soon as next year. But many others will not fare so well and take much longer to recover.”

Many of Europe’s most popular airlines, such as Lufthansa , Ryanair and Wizz Air have said they see steady bookings and growth ahead.

Earlier this month, the International Air Transport Association (IATA) said it expected a net profit of $4.7 billion for the industry next year, with more than 4 billion passengers set to fly. It had previously said only that profits were “within reach” in 2023.

But some airline chiefs warned in November of trouble in 2023. The chief executive of transatlantic-focused Virgin Atlantic said 2023 would be “tough”, while Heathrow Airport’s boss said airlines were increasingly worried about the demand outlook.

British Christmas flight bookings show that demand is still lower than in 2019, with data from UK-based aviation data and analytics firm Cirium showing “departures from UK airports this Christmas remain 14% down compared to the same period in 2019.”

This summer, airlines and airports saw a surge in passenger traffic after the shutdown brought on by the pandemic, with many airlines reporting good summer earnings.

“We now expect the passenger traffic recovery to level off moving forwards ... Next year, we will still miss 220 million passengers, meaning our volumes will only match 2017 levels,” Jankovec said.

Meanwhile, corporate earnings growth is expected to slow in the year ahead in many countries as higher inflation and rising interest rates take an even bigger toll and companies brace for the likelihood of a global economic downturn. US companies are forecast to have the slowest full-year profit growth since 2020 and the start of the coronavirus pandemic. Some top equity strategists predict no profit growth or even a decline in earnings.

Investors have been watching estimates fall in recent months. S&P 500 fourth-quarter 2022 earnings now are expected to decline 1.1% year on year, which would be the first quarterly earnings fall since the third quarter of 2020, according to IBES data from Refinitiv as of Friday.

For the US benchmark S&P 500, analysts project full-year 2023 profit growth of 4.7% following estimated growth of 5.7% for all of 2022, based on Refinitiv data. Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities in New York, recently lowered his profit forecast and expects a decline in year-over-year S&P 500 earnings in 2023. “Everything is about inflation,” he said.

“Companies’ pricing power is about inflation and the cost of their wages is inflation.”

Last Wednesday, the US Federal Reserve raised interest rates by 50 basis points as expected to combat inflation, and Fed Chair Jerome Powell predicted more rate hikes next year even as the economy slips towards a possible recession.

 The S&P 500 is down about 20% this year after falling into its second bear market since the 2020 global sell-off caused by the pandemic.

The S&P 500’s forward 12-month price-to-earnings ratio has slipped to about 17 from 22 at the end of December 2021, but remains above the long-term average of about 16, according to Refinitiv data.

Agencies