IATA: Airline profits to decline sharply as Middle East conflict and fuel costs weigh on industry

The global airline industry’s net profit is projected to decline by nearly half to $23 billion in 2026, according to the International Air Transport Association (IATA). This sharp drop—down from a previous forecast of $41 billion—reflects ongoing war-related disruptions in the Middle East and a 70% surge in jet fuel prices, which are eroding profitability despite rising demand. Regional disparities are stark, with Middle East carriers expected to face collective losses due to weakened demand and operational challenges. IATA Director General Willie Walsh noted that Gulf carriers, though maintaining connectivity, are grappling with financial strain from near-total airspace shutdowns at war’s onset. Even revenue growth of 9.4% to $1.165 trillion will be outpaced by a 13% rise in operating expenses, pushing net profit margins to just 2.0%, half the prior projection of 3.9%. Passenger numbers are still rising, with 5.1 billion travelers expected in 2026—a 2.4% increase—and load factors reaching a record 84%. However, net profit per passenger is plummeting to $4.50, down from $9 last year, while operating profit margins shrink to 4.1%. Walsh emphasized that airlines are absorbing fuel cost hikes, but revenue gains are insufficient to offset broader economic pressures like slower GDP growth and higher inflation. The outlook underscores structural challenges, with returns on invested capital forecast at 4.3%, below the 8.5% cost of capital. Revenue per available tonne-kilometre (ATK) is climbing 8.8%, matching spikes seen only in 2008 and 2010 during past fuel shocks. Yet, without further cost controls or macroeconomic relief, the industry’s financial resilience remains fragile, particularly for smaller carriers with weak balance sheets.