Airline leaders gather in Rio as Iran war drives fuel costs higher

Higher jet-fuel costs are moving quickly from the war in the Middle East into the price of a plane ticket, the routes airlines can profitably fly and the margins carriers can protect. That pressure will be at the center of the 82nd annual meeting of the International Air Transport Association, which is set for June 6 to 8 in Rio de Janeiro and will draw about 1,500 representatives from member airlines, industry partners, associations, manufacturers and suppliers.

The timing could hardly be more sensitive. IATA, which represents more than 370 airlines and roughly 85% of global air traffic, said global passenger demand fell 3.4% in April from a year earlier, the first year-over-year contraction since the post-pandemic recovery. Demand for Middle Eastern carriers plunged 46.6% as the war in the region took an especially sharp toll, while IATA said the recovery in global scheduled seat capacity has been delayed until June.

Airlines are already responding by raising fares, trimming unprofitable routes and conserving cash. Campbell Wilson, the outgoing chief executive of Air India, said some routes have become uneconomic because higher fuel costs and airspace closures add too much expense. Bob Jordan, chief executive of Southwest Airlines, said U.S. carriers have raised fares several times since February without seeing demand weaken, a sign that pricing power still exists in some markets even as the shock spreads across the industry.

The financial backdrop has worsened fast. Before the war intensified, profits across the sector had been expected to reach a record $41 billion this year. Analysts now expect those forecasts to be downgraded. Moody’s Ratings said on May 28 that the global airline outlook had turned negative, warning that persistently high fuel costs and disruptions near the Strait of Hormuz could materially reduce operating profit this year and cut profits by more than 35% in 2026 before a recovery in 2027.

The route disruption is not only a short-term earnings problem. Higher oil prices and limited sustainable aviation fuel supply also make it harder for airlines to meet their net-zero emissions target by 2050. For executives gathering in Rio, the challenge is no longer just how to manage a quarter of weak margins. It is how to navigate a geopolitical shock that can alter fares, capacity and long-term climate plans at the same time. IATA had said in 2025 that the 2026 meeting would be the first time the annual gathering returned to South America since 1999, giving Rio an added symbolic weight as the industry confronts one of its sharpest tests in years.