Fuel Shock Cuts Global Airline Profit Forecast in Half, IATA Warns

The global airline industry is expected to see profits cut nearly in half in 2026 as soaring jet fuel prices driven by conflict in the Middle East continue to pressure carriers worldwide, according to new forecasts from the International Air Transport Association (IATA).

Speaking at the association's Annual General Meeting in Rio de Janeiro, IATA Director General Willie Walsh said the industry now expects to generate $23 billion in net profit this year, down from $45 billion in 2025 and well below the organization's previous forecast of $41 billion.

The sharp revision comes as airlines grapple with a fuel-price shock that has pushed jet fuel costs nearly 70 percent higher year over year. IATA projects average jet fuel prices will reach $152 per barrel in 2026, increasing the industry's collective fuel bill by nearly $100 billion to approximately $350 billion.

"Airlines are bearing the brunt of the fuel price shock," Walsh said. "While airfares are rising, airlines are still absorbing part of the hike in their bottom lines."

Fuel is expected to account for more than 31 percent of airline operating expenses this year, up from roughly 25 percent in 2025. As a result, industry net margins are forecast to fall from 4.2 percent to 2.0 percent, while net profit per passenger is expected to decline from $9.10 to $4.50.

The worsening outlook follows months of disruption linked to conflict in the Middle East, which has driven oil prices higher and affected critical air corridors throughout the region. IATA expects carriers based in the Middle East to collectively post losses in 2026 after generating profits last year, while airlines in North America, Europe and other regions are projected to remain profitable, albeit at lower levels.

Despite the financial pressure, passenger demand has remained resilient. IATA forecasts industry revenues will rise 9.4 percent to a record $1.165 trillion, supported by higher fares, strong travel demand and continued growth in ancillary revenue streams. Passenger numbers are expected to reach 5.1 billion this year, while airlines are projected to fill a record 84 percent of available seats.

However, operating expenses are rising even faster than revenues. IATA expects total industry costs to increase 13 percent in 2026, reaching $1.117 trillion.

The impact is already being felt by airlines around the world. Lufthansa has warned it faces nearly €2 billion in additional fuel expenses this year, while EasyJet reported a first-half loss and cited rising fuel costs as a significant challenge. Ryanair CEO Michael O'Leary has publicly warned that sustained high fuel prices could force weaker European competitors out of the market.

In the United States, government data show airlines spent nearly $6.5 billion on jet fuel in April, a 78 percent increase from the same month a year earlier, despite consuming slightly less fuel. The average cost of jet fuel climbed to $4.11 per gallon, up from $2.31 a year earlier.

As carriers attempt to offset higher fuel bills, many have raised fares and fees, adjusted schedules, delayed capacity growth plans or reduced service on less profitable routes. Industry observers also expect the challenging environment to accelerate consolidation among financially weaker airlines.

For airlines, the key question now is how long passengers and cargo customers will tolerate higher transportation costs before demand begins to soften. While travel demand has remained strong so far, Walsh cautioned that the industry's ability to pass along rising fuel expenses may not be unlimited.

"The big unknown," he said, "is how long travelers and shippers can tolerate the higher costs of connectivity."