Rising fuel prices and operational challenges expected to cut global airline profits by almost half in 2026

GLOBAL AIRLINE PROFITS FORECAST TO FALL SHARPLY

The International Air Transport Association (IATA) has revised its financial outlook for the global airline industry, forecasting a significant decline in profitability during 2026 as a result of conflict-related disruptions in the Middle East and sharply higher fuel prices.

According to IATA, airlines are expected to generate a combined net profit of US$23 billion in 2026, approximately half the US$45 billion achieved in 2025 and well below the previously projected US$41 billion. Net profit margins are forecast to fall from 4.2% in 2025 to 2.0% in 2026.

Despite these challenges, total industry revenues are expected to increase by 9.4% to reach US$1.165 trillion, supported by continued passenger growth and higher fares. Passenger numbers are forecast to reach 5.1 billion, while average load factors are expected to reach a record 84.0%.

FUEL COSTS DRIVING INDUSTRY PRESSURE

IATA attributed much of the deterioration in airline profitability to a rapid increase in fuel costs.

Jet fuel prices are expected to average US$152 per barrel in 2026, nearly 70% higher than the US$90 per barrel average recorded in 2025. As a result, total airline fuel expenditure is forecast to rise from US$252 billion to US$350 billion. Fuel is expected to account for 31.4% of airline operating costs, up from 25.4% in 2025.

IATA Director General Willie Walsh said airlines have absorbed a significant portion of the fuel price increase despite implementing fare adjustments and efficiency improvements.

“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse,” Walsh said.

MIDDLE EAST AIRLINES EXPECTED TO RECORD LOSSES

The Middle East is the only region expected to post an overall loss in 2026.

IATA forecasts a collective net loss of US$4.3 billion for Middle Eastern carriers, compared with a profit of US$7.2 billion in 2025. Demand is expected to decline by 11.4% while operational disruptions, airspace restrictions, flight cancellations and elevated fuel costs continue to impact airline performance.

The association noted that Gulf carriers have faced considerable operational uncertainty following widespread airspace disruptions linked to the conflict, although the region retains long-term advantages including strategic geography, established infrastructure and strong connectivity networks.

AFRICAN AIRLINES FACE LOWER PROFITS

African airlines are expected to remain profitable, although at substantially lower levels than in 2025.

IATA forecasts net profits of US$100 million for African carriers in 2026, down from US$300 million the previous year. Net profit margins are expected to decline from 1.6% to 0.2%.

While major African hub carriers are benefiting from traffic rerouting around the Middle East, rising fuel costs, lower aircraft utilisation and weaker balance sheets are expected to limit the financial benefits of increased passenger volumes.

IATA also highlighted ongoing structural challenges across the continent, including infrastructure limitations, fragmented airspace and restricted access to capital for fleet growth and network expansion.

SUPPLY CHAIN CONSTRAINTS CONTINUE

Beyond fuel costs, airlines continue to face aircraft delivery delays and supply chain constraints.

IATA reported that the global commercial aircraft backlog reached 18,100 aircraft in May 2026, representing more than half of the active global fleet. Airlines have responded by extending the service life of existing aircraft, increasing utilisation rates and operating at higher load factors.

The association warned that the shortage of new aircraft has also slowed progress in improving fuel efficiency and reducing carbon emissions, with industry-wide efficiency gains stalling during 2024 and 2025.

DEMAND REMAINS RESILIENT

Despite economic uncertainty and geopolitical tensions, passenger demand remains resilient.

IATA’s latest consumer survey found that 97% of travellers were satisfied with their most recent journey, while 90% hope future generations will continue to enjoy the benefits of air travel. More than 40% of respondents indicated they expect to travel more over the next 12 months.

The organisation said the industry remains committed to achieving net-zero carbon emissions by 2050 while continuing to support global connectivity, economic development and international trade.