IATA cuts 2026 airline profit outlook as fuel costs surge

Airlines are heading into 2026 with far less cushion and a much bigger fuel bill. The International Air Transport Association cut its global net profit forecast to $23.0 billion from a previous $41 billion projection, saying the damage from Middle East conflict has driven jet fuel costs sharply higher and strained key air corridors just as travel demand stays strong.

IATA said average jet fuel prices are expected to be 70% higher year-on-year, a jump that would add about $100 billion to airlines’ collective fuel costs in 2026. Even with passenger traffic forecast to rise 4.9% and load factors set to reach a record 84.0%, the economics are deteriorating: net profit margin is expected to fall to 2.0% from 4.2% in 2025, net profit per passenger is projected to drop to $4.50 from $9.10, and operating profit is seen sliding to $48.0 billion from $76.4 billion. Revenue is still forecast to reach $1.165 trillion, but IATA’s return on invested capital estimate of 4.3% sits well below the 8.5% weighted average cost of capital, a gap that leaves little room for new shocks.

The sharpest pain is in the Middle East, where airlines are expected to swing from a $7.2 billion profit in 2025 to a $4.3 billion loss in 2026. IATA said demand in the region is projected to fall 11.4%, capacity to contract 4.4%, and the net margin to turn to minus 6.1% from a positive 9.4%. That makes the Middle East the only major region expected to be unprofitable next year, with Gulf hubs such as Dubai, Doha and Abu Dhabi already seeing detours, cancellations and weaker transfer traffic.

For travelers, the consequences are practical and immediate if oil volatility persists. Higher fuel costs typically feed into fares first, then into route trimming and less scheduling flexibility, especially on long-haul itineraries that depend on Gulf connections. Smaller carriers, which have less cash and less ability to hedge fuel, are most exposed to that squeeze and could be pushed toward failure or takeover.

The warning came as the industry met in Rio de Janeiro, Brazil, for IATA’s 82nd Annual General Meeting and World Air Transport Summit, hosted by LATAM Airlines Group. Willie Walsh also pointed to a wider industry stress test, saying aerospace supply chain failures, the war in Ukraine, geopolitical tensions and trade-policy shifts are all weighing on airlines. He said the backlog is now above 18,000 aircraft, the average fleet age has reached 15.2 years, more than 5,000 fuel-efficient replacement jets are still unavailable, and supply chain failures cost airlines at least $11 billion in 2025.