Global airline profits in 2026 halved due to war and a surge in fuel prices
The global aviation industry is entering one of its most demanding years after the post-pandemic recovery. According to the latest financial forecast by the International Air Transport Association, known by the acronym IATA, the world's airlines are expected to achieve 23 billion U.S. dollars in net profit in 2026. That is approximately half of the 45 billion dollars in estimated profit for 2025 and significantly below the earlier forecast of 41 billion dollars. IATA published the new estimate on June 7, 2026, in Rio de Janeiro, as part of the 82nd Annual General Meeting and World Air Transport Summit. The main reasons for the worsening outlook are war-related disruptions in the Middle East, a strong rise in jet fuel prices, supply chain constraints and weaker macroeconomic conditions.
According to IATA, the net profit margin of global airlines in 2026 should fall to 2.0 percent, while for 2025 it is estimated at 4.2 percent. Profit per passenger carried should decrease to 4.50 dollars, which is half as much as a year earlier. The industry's operating profit, according to the same forecast, should fall to 48 billion dollars, from 76.4 billion dollars in 2025. Return on invested capital is estimated at 4.3 percent, which is noticeably below the estimated weighted average cost of capital of 8.5 percent. IATA highlights this gap as an indicator of weakness in a sector in which even strong demand can quickly be suppressed by rising costs.
Revenue is rising, but costs are rising faster
At first glance, basic demand indicators still look strong. IATA expects total aviation industry revenue in 2026 to reach 1.165 trillion dollars, which is 9.4 percent more than the estimated 1.065 trillion dollars in 2025. The number of passengers should rise to 5.1 billion, and the average seat load factor should reach a record 84.0 percent. Passenger ticket revenue, according to IATA, should rise to 839 billion dollars, and ancillary revenue to 165 billion dollars. Air cargo traffic should generate 162 billion dollars in revenue, although actual growth in cargo volumes is estimated to be very modest.
The problem is that revenue growth is not keeping pace with expenditure growth. IATA estimates that operating costs in 2026 will rise by 13 percent, to 1.117 trillion dollars. This means that companies, despite higher ticket prices and solid aircraft load factors, are not fully able to pass the cost shock on to passengers and freight customers. Willie Walsh, IATA's Director General, stated that war-related disruptions in the Middle East and rising fuel prices have worsened the outlook for airlines and that part of the additional costs is being offset through prices and more efficient operations, but not enough to maintain the profitability of the previous year. Smaller companies and carriers that entered 2026 with weakened balance sheets are particularly exposed.
Fuel is once again the biggest pressure on balance sheets
The most important cost shock comes from energy. IATA estimates that the fuel bill in 2026 will rise from 252 billion dollars in 2025 to 350 billion dollars. That estimate is based on an expected average Brent oil price of 95 dollars per barrel and an average jet fuel price of 152 dollars per barrel. According to IATA, the price of jet fuel would thereby be almost 70 percent higher than in 2025, when the average was about 90 dollars per barrel. The share of fuel in operating costs should rise to 31.4 percent, from 25.4 percent a year earlier.
IATA's weekly fuel price monitor shows that the global average jet fuel price in the most recently published week was 141.64 dollars per barrel, after a decline of 11.4 percent compared with the previous week. Although this figure points to a certain short-term easing, the price level remains high compared with the period before the latest crisis. A particular problem is the so-called crack spread, that is, the jet fuel premium over crude oil, which IATA expects to average 57 dollars per barrel in 2026, describing it as a historically high level. Globally, airlines have hedged approximately one third of expected fuel consumption for 2026, but that protection does not eliminate exposure to a more prolonged rise in prices.
High fuel prices have a double effect. On the one hand, they directly increase expenses and force companies to adjust ticket prices, fees and cargo tariffs. On the other hand, they further emphasize the problem of older fleets, because many companies, due to delays in deliveries of new aircraft, are forced to use less efficient models for longer. According to Willie Walsh's report, the average fleet age has reached a record 15.2 years, and the industry lacks more than 5,000 more efficient replacement aircraft. Such a shortage increases maintenance, leasing and fuel costs at a time when energy is the most expensive item in operations.
The Middle East moves from profit into loss
The biggest regional reversal concerns the Middle East. According to IATA, airlines from that region in 2026 should together record a net loss of 4.3 billion dollars, after an estimated profit of 7.2 billion dollars in 2025. The net margin in the region should fall to minus 6.1 percent, and profit per passenger should turn into a loss of 21.40 dollars. Demand measured in revenue passenger kilometres should decrease by 11.4 percent, while capacity should fall by 4.4 percent. IATA states that capacities have been reduced due to flight cancellations, operational disruptions, airspace restrictions and the loss of transfer traffic.
For Gulf carriers, whose business model for decades relied on their geographical position between Europe, Asia and Africa, the crisis has particularly broad consequences. IATA warns that the almost complete closure of parts of regional airspace has revealed the vulnerability of major transit hubs. The loss of connecting traffic reduces load factors, increases unit costs and forces companies to reroute services. Cargo traffic in the region is also under pressure because part of the goods is being redirected toward other hubs in Asia and Europe. Nevertheless, IATA states that the Middle East still has long-term advantages, including developed infrastructure, a more favourable tax environment, relatively low indebtedness and better access to fuel supply.
Different consequences by region
Although the global picture is worse than expected, IATA emphasizes that regional effects differ significantly. All regions except the Middle East should remain profitable, but with lower results than earlier expectations and, in most cases, weaker margins than in 2025. North America and Europe still generate the largest absolute profit, but they are faced with high fuel, labour, infrastructure and regulatory costs. The Asia-Pacific region maintains traffic growth, but is sensitive to disruptions in oil supply and currency pressures. Latin America and Africa remain profitable, but with low margins and limited ability to absorb shocks.
- According to IATA, European airlines in 2026 should achieve 9.6 billion dollars in net profit, with a margin of 3.1 percent. Europe gains part of its traffic from more direct connections between Europe and Asia, but at the same time faces high costs of fuel, regulation, air charges and industrial action.
- North American carriers, according to the same forecast, should achieve 9.4 billion dollars in net profit, with a margin of 2.5 percent. IATA states that they are relatively isolated from the direct operational consequences of the war in the Middle East, but are more exposed to rising fuel prices because many have largely moved away from fuel price hedging.
- Asia-Pacific companies should achieve 6.6 billion dollars in net profit, with a margin of 2.1 percent. Some carriers benefit from changes in traffic flows on routes between Europe and Asia, but the region depends heavily on oil imports from the Gulf and is therefore sensitive to fuel prices and availability.
- Latin America should achieve 1.2 billion dollars in net profit, while Africa should remain barely positive, with 0.1 billion dollars in profit. In both cases, IATA warns of weaker financial flexibility, more expensive capital, limited infrastructure and a lower ability to expand quickly.
Such a regional picture shows that high demand does not mean equal earnings for everyone. Carriers with a larger network, a stronger premium segment, better access to capital and more flexible capacities can more easily offset rising costs. Low-cost carriers and smaller companies, especially those that rely on domestic markets or have limited ability to increase revenue per passenger, are under greater pressure. IATA specifically states that in North America there could be further separation between more resilient network carriers and more constrained low-cost operators. In Europe, meanwhile, regulatory costs and charges further complicate the recovery of margins.
Supply chains remain a long-term constraint
In addition to fuel and geopolitics, the industry continues to be pressured by disruptions in aircraft production and maintenance. IATA states that the order backlog in May 2026 reached 18,100 aircraft, compared with 17,000 in 2024. Production is gradually recovering, but not quickly enough to make up for the shortage created during the pandemic and subsequent stoppages. At the same time, new orders continue to exceed deliveries, so pressure on capacity continues. The shortage of new aircraft limits growth, increases leasing prices and forces companies to use older aircraft for longer.
IATA also warns of the climate dimension of this problem. The lack of new aircraft halted progress in fuel consumption efficiency in 2024 and 2025, for the first time in history according to the association's assessment. This makes it harder to reduce CO2 emissions and increases operating costs at a time when fuel and environmental obligations are already more expensive. Companies are adapting by increasing fleet utilization, achieving higher load factors and managing capacity more cautiously, but such measures have limits. When flight networks are rerouted due to closed airspace, available aircraft and crews become an even more important resource.
Passengers still want to fly, but are more cautious
Despite rising prices and geopolitical disruptions, IATA's public opinion survey conducted in April 2026 in 15 countries, on a sample of 6,500 respondents who had travelled at least once in the previous year, shows that demand has not disappeared. According to that survey, 41 percent of passengers plan to travel more in the next 12 months than in the previous 12 months, while an additional 52 percent plan to travel the same amount. At the same time, 83 percent of respondents state that they are more cost-conscious, and 86 percent expect transport prices to rise and fall depending on oil price movements. IATA also states that 49 percent of respondents expect to spend more on travel in the next year, while 43 percent expect spending similar to before.
Confidence in the safety of air transport, according to IATA, remains high. In the same survey, 91 percent of respondents said that flying is safe, and 85 percent said that it is safer today than ever. Still, passengers are behaving more cautiously: 86 percent say they check government travel advisories when booking, 84 percent do more research before travelling, and 71 percent book closer to the travel date to avoid surprises. IATA estimates that the average real return airline ticket, including ancillary services, will amount to 462 dollars, which would be 26.3 percent less than in 2016 in real terms. This shows that air transport remains widely accessible, but with less room for new cost shocks.
Sustainable fuels are progressing slowly
Pressure on costs does not remove the industry's environmental obligations. According to IATA, the aviation sector remains committed to the goal of net-zero CO2 emissions by 2050, but key solutions are not developing fast enough. Sustainable aviation fuel, known as SAF, should in 2026 reach about 2.4 million tonnes of production, or approximately 0.8 percent of total aviation fuel consumption. IATA estimates that the additional cost of purchasing SAF for airlines will amount to about 4.3 billion dollars. In addition, the cost of compliance with the CORSIA system for international aviation is estimated at 1.2 to 1.6 billion dollars.
In its document on sustainable aviation fuels, IATA states that SAF is still several times more expensive than conventional aviation fuel and that the market is limited by feedstocks, technology, infrastructure and investment. The association emphasizes that accelerating production requires government measures, incentives, regulatory certainty and market development, but also that fuel blending mandates themselves can produce undesirable consequences if they are not accompanied by sufficient supply. In current conditions, when conventional fuel is already extremely expensive, the additional cost of decarbonization becomes even more sensitive. For that reason, two discussions will take place simultaneously in 2026: how to maintain the financial stability of airlines and how not to slow the transition toward cleaner transport.
The industry remains airborne, but with a thinner safety net
IATA's latest forecast does not point to a collapse in demand, but to significantly thinner earnings in an industry that operates with low margins even in good years. Revenue is rising, aircraft are full, passengers still plan to fly, and cargo traffic remains important. However, war-related disruptions, more expensive fuel, slower aircraft deliveries, regulatory costs and weaker economic prospects mean that greater traffic does not guarantee greater profit. In such conditions, airlines will rely increasingly on flexible route management, careful pricing, ancillary revenue, cost control and better fleet utilization.
For passengers, this could mean higher prices in part of the market, more frequent schedule changes and greater importance of timely monitoring of travel information. For the industry, 2026 becomes a test of the resilience of a model that must simultaneously maintain global connectivity, finance fleet renewal and invest in decarbonization. IATA estimates that the sector will still make a profit, but significantly less than expected before the latest energy and geopolitical shock. The biggest unknown remains the duration of war-related disruptions and the ability of passengers and freight customers to accept more expensive global connectivity over the long term.
Sources:
- International Air Transport Association, IATA – financial forecast for 2026 and regional overview of the impact of the war in the Middle East, fuel prices and supply chains (link)
- International Air Transport Association, IATA – Willie Walsh's report on the state of the global air transport industry at IATA's 82nd Annual General Meeting (link)
- International Air Transport Association, IATA – weekly jet fuel price monitor and Platts index methodology (link)
- International Air Transport Association, IATA – data on the decline in passenger demand in April 2026 due to the war in the Middle East (link)
- International Air Transport Association, IATA – fact sheet on sustainable aviation fuels, SAF production and the role of public policies (link)