The global airline industry has slashed its 2026 profit forecast by nearly half, citing the ongoing Middle East conflict that has driven up fuel costs and disrupted key air corridors.
The International Air Transport Association, representing over 370 airlines, now expects a combined net profit of US$23 billion in 2026-down from a previous projection of US$41 billion and below the US$45 billion earned in 2025. The downgrade underscores the industry's vulnerability to geopolitical shocks and fuel volatility, even as passenger demand remains resilient and revenues are set to top US$1.1 trillion.
IATA Director General Willie Walsh said two major factors are driving the revision: a significant increase in jet fuel prices and disruption to Gulf region airlines. He warned that smaller carriers may face bankruptcy or acquisition. U.S. low-cost carrier Spirit Airlines shut down last month, the first airline casualty of the Iran war.
Airlines are expected to cut unprofitable routes to protect margins, while fares-already surging since the conflict began-are unlikely to drop soon. Walsh noted that robust demand combined with reduced capacity will keep fares elevated.
The conflict, triggered by U.S. and Israeli airstrikes on Iran, has forced airlines to reroute flights around closed airspace, adding hours to journeys and increasing fuel burn. IATA expects the industry's fuel bill to surge to about US$350 billion this year, up from roughly US$252 billion in 2025, with fuel accounting for nearly a third of operating costs. Profit per passenger is expected to fall to about US$4.50, roughly half last year's level.
On the upside, industry revenues are projected to rise 9.4% to around US$1.16 trillion, fueled by steady travel demand, higher fares, and ancillary income. However, aircraft delivery delays at Boeing and Airbus are forcing airlines to keep older, less fuel-efficient planes in service longer, raising maintenance costs and hampering margin improvements.