Global airlines are heading into a tougher 2026, with industry profits expected to halve as war-related disruption in the Middle East and a sharp rise in fuel prices weigh heavily on carriers, according to the International Air Transport Association (IATA). 

IATA said airlines are now expected to make a combined net profit of $23 billion this year, down from an earlier forecast of $41 billion and roughly half the $45 billion estimated for 2025. 

Margins are also expected to narrow sharply, with the industry’s net profit margin forecast at 2 per cent, compared with a previous projection of 3.9 per cent and the 4.2 per cent recorded last year. 

The squeeze is equally clear at passenger level. Net profit per passenger is expected to fall to $4.50, half the $9.10 achieved in 2025, while operating profit is forecast to decline to $48bn, from $76.4bn. 

“War-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse. Globally, airlines are expected to see profitability halve compared to 2025. Profits will shrink from $45bn in 2025 to $23bn this year. And margins will shrink from 4.2 per cent to 2 per cent. All airline bottom lines are suffering from the rapid 70 per cent rise in jet fuel prices,” said Willie Walsh, IATA’s Director General. 

“Some of the additional cost is being recuperated by adjusting prices and improving efficiency, but it will not be sufficient to maintain profitability at the previous year’s level. Smaller carriers that started the year with weak balance sheets are certainly struggling,” he added. 

The regional picture, however, is far from uniform. IATA said all regions are expected to remain profitable in 2026, although with much weaker results, apart from the Middle East, where carriers are forecast to move into loss. 

“At the regional level, all are in the black but with sharply reduced financial performance, with the exception of the Middle East. The Gulf carriers face operational uncertainty following a near complete shutdown of airspace at the outbreak of the war. These carriers are doing an amazing job maintaining connectivity, but major financial impacts are unavoidable,” Walsh said. 

The warning comes despite continued demand for travel. Passenger numbers are expected to reach 5.1bn this year, up 2.4 per cent on 2025, while airlines are forecast to fill 84 per cent of available seats, setting a new record load factor. 

Total industry revenues are also expected to rise, reaching $1.165 trillion, up 9.4 per cent from $1.065 trillion last year. 

However, the problem for airlines is that costs are rising faster. Operating expenses are forecast to increase by 13 per cent to $1.117 trillion, leaving carriers with far less room to absorb further shocks. 

That pressure is being felt most sharply through fuel. 

IATA said fuel costs are expected to rise by nearly 40 per cent, from $252bn in 2025 to $350bn in 2026. The forecast is based on an average Brent crude price of $95 per barrel, up from $69 last year, while jet fuel prices are expected to average $152 per barrel, almost 70 per cent higher than in 2025. 

As a result, fuel is expected to account for 31.4 per cent of total operating expenses this year, compared with 25.4 per cent in 2025. 

“Airlines are bearing the brunt of the fuel price shock. While air fares are rising, airlines are still absorbing part of the hike in their bottom lines. Net profit per passenger is expected to fall to $4.50, half of what it was last year. Under the circumstances, that shows resilience. But it won’t even buy you a hot dog at most of the FIFA World Cup venues and it does not leave much of buffer should other costs or taxes start rising,” Walsh said. 

IATA said airlines have hedged roughly one third of their expected fuel consumption for 2026, helping to smooth short-term volatility but not shielding them from sustained price increases. 

Moreover, many carriers hedge against crude oil rather than jet fuel, as crude markets are more liquid. This leaves them exposed to the crack spread, the premium of jet fuel over Brent crude, which is expected to average $57 per barrel, an historic high. 

The pressure is not limited to fuel. Non-fuel costs are forecast to rise to $767bn, with labour remaining the largest component at $271bn. 

The airline workforce has reached 3.33 million, up 1.0 per cent from 2025, although productivity per employee has slipped slightly as airlines prioritise operational resilience in the face of disruption. 

Aircraft shortages are adding another layer of strain. IATA said lease rates have risen to record levels, reflecting limited aircraft availability and strong demand from airlines looking to expand or renew their fleets. 

Older aircraft are also staying in service for longer, increasing maintenance costs and limiting gains in fuel efficiency. 

Supply chain problems remain a major constraint. Although aircraft production is gradually recovering, deliveries remain below pre-Covid levels and are still not enough to close the shortfall built up during the pandemic. 

The backlog reached 18,100 aircraft in May 2026, up from 17,000 in 2024, representing more than 50 per cent of the active global fleet. 

Airlines have responded by extending the life of existing aircraft, increasing daily utilisation and flying fuller planes. Even so, IATA warned that the shortage is both raising costs and capping growth. 

It also said the lack of new aircraft halted gains in fuel efficiency in 2024 and 2025 for the first time in history, weakening the industry’s regular progress on reducing carbon emissions. 

The broader economic backdrop is also becoming less supportive. IATA expects global GDP growth to slow to 2.5 per cent in 2026, from 3.4 per cent in 2025, while inflation is forecast to rise to 5 per cent, from 4.1 per cent. 

World trade growth is also expected to fall sharply, dropping to 1.9 per cent from 4.6 per cent. 

For passengers, higher costs are already being reflected in fares. 

Passenger ticket revenues are expected to reach $839bn, up 9.2 per cent from $768bn in 2025. Since this outpaces expected passenger demand growth of 2.1 per cent, IATA said fares are rising as airlines try to recover part of the oil price shock. 

Passenger ticket yields are forecast to grow by 7 per cent. 

At the same time, airlines are leaning more heavily on ancillary income. Ancillary and other revenues are projected to rise by 12.6 per cent to $165bn, making them a larger contributor than air cargo for the first time since 2019. 

Cargo revenue is also expected to grow, reaching $162bn, up 7.2 per cent from $151bn last year. 

However, this is mainly being driven by higher yields rather than stronger volumes. Cargo volumes are expected to reach 71.7m tonnes, up only 0.2 per cent, while cargo tonne kilometres are forecast to grow by just 0.7 per cent. 

In Europe, airlines are expected to remain profitable, but with reduced earnings. Net profit is forecast at $9.6bn, down from $13bn in 2025, while the net margin is expected to fall to 3.1 per cent. 

Profit per passenger is forecast at $7.50, compared with $10.30 last year. 

IATA said Europe’s heavy reliance on Gulf imports for jet fuel is creating significant cost pressure, although this has been partly softened by pre-crisis hedging covering around 70 per cent of fuel needs. 

The region has gained some traffic through direct Europe-Asia connectivity, replacing some journeys that previously moved through Gulf hubs. However, parts of Europe remain affected by Russian airspace restrictions, while slower growth and higher energy costs are expected to weigh on household purchasing power. 

European carriers are also dealing with higher regulatory costs, sustainable aviation fuel mandates, airport and air navigation charges, as well as industrial action in several markets. 

The Middle East faces the sharpest reversal. 

Carriers in the region are expected to post a combined net loss of $4.3bn in 2026, compared with a $7.2bn profit in 2025. The region’s net margin is forecast at minus 6.1 per cent, compared with 9.4 per cent last year. 

Demand is expected to fall by 11.4 per cent, while capacity is forecast to decline by 4.4 per cent. 

IATA said the region is at the centre of the shock from the war, with capacity cuts, cancellations, operational disruption and elevated fuel prices all pushing up costs. The loss of transfer traffic is also weighing on load factors and lifting unit costs. 

Still, the association said the region retains important structural advantages, including a favourable tax environment, relatively secure access to fuel, low financial leverage, strong infrastructure and dense networks. 

Cargo markets in the Middle East are also under pressure, as disruption reduces effective capacity and shifts transit cargo towards other regions. 

Over the longer term, IATA said these advantages should support a recovery in traffic, although potentially at lower margins, which could reshape the economics of the hub-based model. 

North American airlines are expected to generate $9.4bn in net profit, down from $12.4bn last year. 

The region’s net margin is forecast at 2.5 per cent, while profit per passenger is expected to fall to $8.10, from $10.80. 

IATA said North American carriers have largely moved away from fuel hedging, meaning higher jet fuel prices feed more quickly into their cost base. This is expected to force faster pricing responses. 

Network carriers are seen as better placed than low-cost operators, which are more exposed to softer domestic demand and have fewer premium products through which to absorb higher costs. 

Although North American airlines remain relatively insulated from Middle East operational disruption, IATA said high financial leverage and increased labour costs following recent wage rises leave the region more sensitive to cost shocks. 

In Asia Pacific, net profit is forecast at $6.6bn, down from $9.8bn in 2025. 

The region’s net margin is expected to fall to 2.1 per cent, while profit per passenger is forecast at $3.40, compared with $5.30 last year. 

Demand remains relatively strong, with passenger traffic forecast to grow by 5.1 per cent and capacity by 3.6 per cent. 

However, IATA said the region’s heavy dependence on crude oil imports from the Gulf makes it vulnerable to fuel supply disruption and price spikes. Longer routings caused by airspace restrictions are also increasing fuel burn and tightening effective capacity. 

Some Asia Pacific carriers are benefiting from traffic shifts on Europe-Asia routes, while disruptions at Middle Eastern hubs have created cargo opportunities on the same trade lanes. 

However, currency weakness in several Asian markets is increasing the local cost of dollar-denominated expenses, particularly fuel. 

In Latin America, net profit is expected to fall to $1.2bn, from $1.9bn in 2025. 

The region’s net margin is forecast at 2.1 per cent, while profit per passenger is expected to decline to $3.50, from $5.90. 

Demand is expected to grow by 5 per cent, while capacity is forecast to rise by 3.3 per cent. 

IATA said Latin America is being affected by pressure on several regional currencies, while demand remains more sensitive than in other regions because of lower income levels and a smaller share of business travel. 

Airlines in the region also tend to have less balance sheet flexibility and higher funding costs, limiting their ability to absorb shocks or invest in fleet and network expansion. 

Africa is expected to remain only marginally profitable, with net profit forecast at $0.1bn, down from $0.3bn in 2025. 

The region’s net margin is expected to fall to 0.2 per cent, while profit per passenger is forecast at just $0.40. 

Demand is expected to grow by 10 per cent, the strongest among all regions, while capacity is forecast to rise by 7.7 per cent. 

IATA said African hub carriers are seeing stronger traffic as routes are adjusted to avoid the Middle East. However, profitability is being held back by fuel supply and pricing pressures, lower aircraft utilisation and weaker balance sheets. 

Any gains are likely to be concentrated among a small number of hub carriers with established links between Africa, Europe and Asia, while smaller and more fragmented operators are expected to face the toughest conditions. 

Infrastructure remains another constraint, with weak facilities, fragmented airspace and limited cross-border coordination reducing network efficiency and raising costs. 

Despite the pressure on airlines, IATA said passengers still see air travel as valuable. 

The average real return airfare, in US dollars and including ancillaries, is expected to be $462, which would be 26.3 per cent lower than in 2016. 

An IATA public opinion poll conducted in April 2026 across 15 countries, covering 6,500 respondents who had taken at least one trip in the previous year, found that 97 per cent were satisfied with their last travel experience. 

The survey also showed that 88 per cent agreed that air travel makes their lives better, 79 per cent considered air travel good value for money, 81 per cent said they had many choices when booking, and 88 per cent said they cared about their ability to fly in future. 

The industry’s wider role also remains recognised by travellers. Some 89 per cent agreed that air connectivity is critical to the economy, 88 per cent said air travel has a positive impact on societies, and 83 per cent said the global air transport network contributes to the UN Sustainable Development Goals. 

Meanwhile, 90 per cent said they hoped future generations would be able to travel by air to experience more of the world. 

Confidence in the sector’s climate efforts also remains relatively high. IATA said 80 per cent of respondents agreed that the industry is showing commitment to working towards net zero carbon emissions by 2050, while 76 per cent said aviation leaders are taking the climate challenge seriously. 

A further 78 per cent said they believe flying can become sustainable. 

Even with conflicts and disruption affecting parts of the world, traveller confidence remains strong. Some 41 per cent of respondents said they planned to travel more over the next 12 months, while 52 per cent expected to travel at the same level. 

At the same time, 91 per cent said flying is safe, and 85 per cent said it is safer today than ever. 

Still, travellers are clearly becoming more cautious. The poll showed that 86 per cent check government travel advisories when booking, 84 per cent are researching more before travelling, 81 per cent are concerned about disruption due to geopolitical conflict, and 71 per cent are booking closer to the date of travel to avoid surprises. 

However, 68 per cent said they had not changed their travel habits at all.