Rio de Janeiro: The global airline industry has sharply reduced its profit outlook for 2026 as escalating conflict in the Middle East continues to drive up fuel costs, disrupt critical air routes, and place significant pressure on airline operations worldwide. The International Air Transport Association (IATA), representing more than 370 airlines responsible for around 85 percent of global air traffic, announced that it now expects the industry to post a combined net profit of approximately $23 billion in 2026, nearly half of its earlier forecast of around $41 billion.
The revised projection also marks a steep decline from the estimated $45 billion profit recorded in 2025, highlighting the growing financial strain facing airlines despite strong passenger demand and rising revenues.
Speaking at IATA’s annual meeting in Rio de Janeiro, Director General Willie Walsh attributed the downgrade primarily to soaring jet fuel prices and the operational disruptions caused by the ongoing conflict involving Iran.
According to Walsh, the airline industry has been hit by a combination of unexpected fuel price increases and extensive disruption to aviation operations across the Gulf region. These factors have significantly altered the financial outlook for carriers worldwide and exposed the vulnerability of an industry that traditionally operates on relatively thin profit margins.
The conflict, triggered by U.S. and Israeli military strikes on Iran, has led to widespread airspace restrictions and closures across parts of the Middle East. Airlines have been forced to reroute flights around affected regions, adding considerable flight time to many long-haul journeys. These detours increase fuel consumption, create scheduling challenges, and place additional pressure on already stretched airline capacity.
At the same time, fears of disruptions to global oil supplies have pushed crude oil and jet fuel prices sharply higher. Fuel remains the single largest operating expense for most airlines, and the sudden increase in costs has significantly impacted profitability.
IATA estimates that the airline industry’s collective fuel bill will rise to approximately $350 billion this year, compared with around $252 billion in 2025. Fuel is now expected to account for nearly one-third of total airline operating expenses, placing intense pressure on carriers across all regions.
As a result, profitability on a per-passenger basis is also expected to decline significantly. Airlines are projected to earn only about $4.50 per passenger, roughly half the level achieved last year.
Despite the challenging environment, passenger demand remains resilient. IATA expects industry revenues to increase by 9.4 percent, reaching approximately $1.16 trillion. The growth is expected to be supported by strong travel demand, higher ticket prices, and expanding revenue streams from ancillary services such as seat upgrades, baggage fees, and onboard purchases.
However, travelers may continue to face elevated airfares in the coming months. Walsh indicated that airlines are likely to reduce or suspend unprofitable routes to protect margins. With demand remaining strong while available capacity tightens, ticket prices are expected to remain high rather than return to pre-conflict levels.
The industry body also warned that some financially weaker carriers could struggle to survive the current conditions. Walsh suggested that higher fuel costs and operational challenges may force certain smaller airlines into bankruptcy or make them acquisition targets for larger competitors. He pointed to the recent shutdown of U.S.-based low-cost carrier Spirit Airlines as an example of the mounting pressure facing airlines.
The Middle East is expected to be the region most severely affected by the crisis. Major Gulf carriers, including Emirates, Qatar Airways, and Etihad Airways, face heightened operational uncertainty due to airspace disruptions and changing travel patterns. IATA expects airlines in the region to experience losses, while most other regions are likely to remain profitable, albeit at reduced levels.
Adding to the industry’s difficulties are ongoing aircraft delivery delays from manufacturers Boeing and Airbus. Supply chain constraints have forced airlines to retain older, less fuel-efficient aircraft for longer periods, increasing maintenance costs and limiting efforts to improve operational efficiency.
