Despite one of the most challenging operating environments in recent years, the global aviation sector continues to demonstrate remarkable resilience. Drawing on key discussions from the ACC Airline Conference 2026, Dave Williams, Director of Leasing at ACC Aviation, explores how airlines and ACMI providers are adapting to a market shaped by geopolitical disruption, elevated fuel costs and continued economic uncertainty.

While the conflict in the Middle East has had a more significant impact on global aviation than the ongoing Russia-Ukraine war, passenger demand has remained surprisingly robust. IATA reports a 0.5% year-on-year decrease in total passenger demand, with the global passenger load factor standing at 83.2%, just 0.3 percentage points lower than the previous year. Excluding the Middle East, global passenger demand actually increased by 0.3%, demonstrating that consumers continue to prioritise travel despite ongoing geopolitical uncertainty.

ASIA-PACIFIC CONTINUES TO SHAPE GLOBAL AVIATION

A key takeaway from the conference was the growing dominance of the Asia-Pacific market, which now accounts for 37% of global passenger traffic and 41% of cargo traffic. China remains the largest aviation market in the region, representing approximately 40% of passenger traffic, followed by India with around 12%.

The long-term growth outlook remains equally compelling. Industry forecasts suggest that five Asia-Pacific countries, China, India, Indonesia, Vietnam and Thailand, will collectively account for 40% of global passenger traffic growth over the next three decades, reinforcing the region’s position as a key driver of aviation expansion.

FUEL COSTS CONTINUE TO CHALLENGE AIRLINE ECONOMICS

Airlines have faced significant cost pressures throughout 2026, driven primarily by rising fuel prices following instability in the Middle East. Fuel remains the largest single operating expense for most airlines, typically accounting for around 30% of total operating costs. IATA forecasts that average jet fuel prices in 2026 will be approximately 70% higher than in 2025, placing additional pressure on airline profitability across the sector.

While sustainability remains a strategic objective across the industry, immediate economic realities have pushed it down the list of priorities for many operators. Sustainable Aviation Fuel is forecast to account for just 0.8% of total jet fuel consumption in 2026, highlighting the scale of the challenge facing the industry’s net-zero ambitions. At the same time, airlines continue investing heavily in fleet modernisation: aircraft such as the Airbus A321XLR are rapidly expanding route possibilities, enabling operators to serve longer, thinner markets more efficiently while reducing operating costs compared with traditional widebody aircraft.

AIRLINES BALANCE CAUTION WITH LONG-TERM GROWTH AMBITIONS

Although higher costs have contributed to a number of airline failures and bankruptcies globally, many carriers continue to plan confidently for future growth. In Europe, Turkish Airlines, Ryanair, easyJet and Wizz Air remain among the most active airlines in terms of aircraft orders, while IndiGo continues to lead across Asia and globally. In the Americas, United Airlines and Southwest Airlines maintain some of the largest order books in the industry.

The current market also highlights the value of strong balance sheets and disciplined operational management. Ryanair remains one of Europe’s strongest performers, increasing operating margins from 11% to 15% in 2026, while Singapore Airlines improved operating margins from 9% to 13%, demonstrating that profitability remains achievable even in difficult conditions. The distinction between low-cost and full-service carriers is also becoming increasingly blurred, with more partnerships emerging and low-cost airlines adopting elements traditionally associated with full-service operations.

ACMI MARKET ADJUSTS TO A NEW REALITY

The global ACMI market has experienced significant change over the past two years, with ACC Aviation’s assessment drawing on market data from CH-Aviation.

“Summer 2024 represented the peak of the ACMI cycle, both in terms of pricing and demand,” said Dave Williams. “While 2025 delivered the strongest ACMI year on record, measured by total block hours, we began to see signs of softening demand, particularly in the narrowbody market.”

The geopolitical instability experienced throughout 2026 has further altered market dynamics. Airport closures, airspace restrictions, rapidly rising fuel prices and increasingly late passenger booking patterns have all contributed to weaker ACMI demand. By the end of the third quarter, global ACMI activity was running more than 15% behind the same period in 2025.

“2025 benefited from unusually balanced demand throughout the year, including strong utilisation during the winter months in Q1 and Q4. I don’t expect 2026 to reach similar levels, and I anticipate the gap between the two years to remain evident through to year-end,” Williams added.

DIFFERENT AIRCRAFT SEGMENTS SHOW CONTRACTING TRENDS IN 2026 ACMI MARKET

One notable trend observed by ACC Aviation has been a reduction in ACMI demand for narrowbody aircraft, with recorded activity so far in 2026 down 25% against the full-year 2025 figure. This is driven by the decline in activity of the A320ceo, the number one ACMI aircraft over the past ten years, which has seen a 37% year-on-year drop in 2026 up to the end of the third quarter, compared with the same period in 2025. The B737-800 is down 17%, the A321 is down 38% and the A319 is 28% behind, reflecting the challenging conditions in the narrowbody ACMI market in 2026.

Conversely, the overall widebody ACMI market has increased by 7% year-on-year in 2026 up to the end of the third quarter, compared with the same period in 2025. Across the widebody types, the key aircraft have actually seen declines, with the A330-200 down 8%, the A330-300 down 14% and the B777-300ER down 7%, attributed to ACMI contracts being paused due to airport and airspace closures in the Middle East. Other aircraft types in the widebody segment, such as the B787-9 Dreamliner, have seen significant increases, albeit from a smaller starting base.

OPPORTUNITIES CONTINUE TO EMERGE

“Despite softer market conditions overall, opportunities remain for operators willing to adapt,” Williams stressed. Europe continues to dominate the ACMI sector globally, although activity has declined 23% compared with last year. Meanwhile, demand is emerging in markets where operational flexibility and a willingness to navigate more complex environments are particularly valuable.

“Israel is currently generating ACMI opportunities for operators prepared to navigate a more complex operational environment,” said Dave Williams.

CONTRACTUAL CERTAINTY BECOMES INCREASINGLY IMPORTANT

The current environment is also creating new legal and contractual challenges for ACMI providers and lessees. Williams cautioned that with agreements often signed many months before operations commence, airlines face the possibility that routes originally planned could subsequently be affected by geopolitical developments, making them commercially unviable or operationally impossible.

Operators should not assume force majeure provisions will automatically provide protection in these circumstances. Outcomes depend heavily on the specific contractual structure, operational deployment and jurisdiction involved. For cross-border ACMI arrangements in particular, agreeing governing law and jurisdiction at the outset has become increasingly important to reducing future uncertainty.

OUTLOOK FOR 2027

“Looking ahead, I expect airlines to remain cautious over the next 6 to 12 months, with further consolidation and potential airline failures still possible across certain markets. However, periods of disruption can also create opportunities for agile operators. Should stability return to the Middle East, airlines able to respond quickly to changing demand patterns could benefit significantly. Combined with ongoing aircraft delivery constraints and OEM production bottlenecks, a return to full capacity utilisation would likely provide renewed support for ACMI demand globally.”

Williams concluded by raising a question facing many operators across the industry: “Should airlines downsize and consolidate to protect profitability today, or continue investing in fleet growth to ensure they are well positioned to take advantage of opportunities when the market rebounds? For many, that decision could define their competitive position for years to come.”