IATA halves 2026 airline profit forecast on Mideast war, fuel price surge

The International Air Transport Association (IATA) has sharply cut its profit outlook for the global airline industry, citing disruptions linked to the Middle East conflict and a surge in fuel prices that have eroded carriers' earnings worldwide.

Airlines are now expected to post a combined net profit of $23 billion in 2026, nearly half IATA's previous forecast of $41 billion and down from an estimated $45 billion in 2025.

The industry's net profit margin is projected to fall 2% from 4.2% in 2025, while net profit per passenger is expected to decline to $4.5 from $9.10 a year earlier.

"The outlook for airlines has worsened as war-related disruptions in the Middle East and rising fuel costs weigh heavily on the industry," stated IATA Director General Willie Walsh at an event held in Rio de Janerio.

The Middle East is expected to be the only region where airlines collectively fall into the red, as carriers contend with weak demand and operational disruptions linked to the conflict. All other regions are expected to remain profitable, though at lower levels than previously forecast, noted Walsh.

Industry operating profit is forecast to decline to $48 billion in 2026 from $76.4 billion in 2025, while return on invested capital is expected to drop to 4.3% from 6.6%, remaining well below the estimated weighted average cost of capital of 8.5%, he added.

Despite weaker profitability, airline revenues are projected to rise 9.4% to a record $1.165 trillion in 2026, supported by higher fares and ancillary revenues as carriers seek to offset rising costs.

Resilient passenger traffic 

Passenger traffic is expected to remain resilient. IATA forecasts passenger numbers will increase 2.4% to 5.1 billion in 2026, while load factors are expected to reach a record 84.0%, up from 83.5% in 2025.

The industry's revenue growth, however, is expected to lag a 13% increase in operating expenses, which are forecast to reach $1.117 trillion.

Fuel remains the largest source of pressure on airline finances. IATA expects fuel costs to rise nearly 40% to $350 billion in 2026 from $252 billion in 2025, driven by higher crude oil and jet fuel prices.

Brent crude is expected to average $95 per barrel this year, up from $69 in 2025, while jet fuel prices are forecast to jump to $152 per barrel from $90. Fuel is expected to account for 31.4% of total operating expenses, up from 25.4% a year earlier.

Walsh said airlines had been able to recover part of the increase through higher fares and efficiency gains but not enough to maintain last year's profitability levels.

"Airlines are bearing the brunt of the fuel price shock," Walsh said. "While air fares are rising, airlines are still absorbing part of the increase in their bottom lines," he added.

Cargo revenue seen robust

Passenger ticket revenues are forecast to rise 9.2% to $839 billion in 2026, while ancillary revenues are expected to grow 12.6% to $165 billion, surpassing cargo revenues for the first time since 2019.

Cargo revenues are expected to increase 7.2% to $162 billion, supported primarily by higher yields rather than volume growth.

The broader economic backdrop is also expected to weaken. IATA forecasts global GDP growth slowing to 2.5% in 2026 from 3.4% in 2025, while inflation is expected to rise to 5.0% and world trade growth to slow to 1.9%.

Airlines are also expected to incur between $1.2 billion and $1.6 billion in costs related to compliance with the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia). Additional spending on sustainable aviation fuel is projected to reach $4.3 billion this year.-TradeArabia News Service